Marijuana News Today
The marijuana news today is a mixed bag as the pot stock market hit a stumbling block while marijuana legalization won two key victories in the United States.
On the legalization front, we have two wins in the northeast United States. For one, New York State voted to decriminalize pot use. (Source: “New York lawmakers OK pot decriminalization,” Pix 11, June 21, 2019.)
As it stands now, marijuana possession will carry nominal fines in New York. The newly passed law will also see the expungement of criminal records for low-level pot possession. This is significant, since that was one of the sticking points with the original legalization bill.
This is a sour victory for those like myself, who had hoped to see full legalization in the Empire State. Still, it’s a win. While legalization efforts have stalled, lawmakers have said that this is a step along the path toward that goal. Some have said that 2020 will be the year that weed is finally legalized in New York.
Nearby Maine has also made progress when it comes to marijuana laws. While marijuana was already legal in Maine, the state recently passed new regulations that relax some of the restrictions placed on pot, like business regulations and food restrictions. (Source: “Maine Legislature approves recreational marijuana rules,” WGME, June 21, 2019.)
This is something that I’ve been clamoring for for many months. Many of the current restrictions in place are too onerous on the legal cannabis sector and are hurting sales, which in turn hurts pot stocks.
Moreover, the heavy burdens of government oversight have made it so the marijuana black market is thriving in legal environments when instead it should be dying out.
Maine’s approach is one I hope to see more of: safe and reasonable regulations that don’t put undue pressure on legal businesses.
Two of the main arguments for legalization—at least from a government’s perspective—is that a legal pot market will suffocate the criminal market and bring in big tax revenues. Both of those benefits are being reduced by government overreach. Until governments rethink their approach, we won’t see legal marijuana reach its full potential.
It’s a complicated problem without easy solutions, but governments like Maine are showing that safe and sane regulation can be done.
The marijuana news today as it pertains to the pot stock market is less than ideal. Across the board, we have been seeing pot stocks sink during what has been one of the worst days for pot stocks in 2019. Many companies are seeing their share prices fall by several points, around three or four percent.
Canopy Growth Corp (NYSE:CGC) is one of the companies hit hardest, and for good reason: its quarterly report under-delivered on expectations.
CGC stock collapsed nearly seven percent in early-morning trading today, and is down about one percent over the past five days. Today’s fall wiped out the gains made in the prior week.
The company’s adjusted loss per share hit CA$0.98, versus an expected CA$0.32. Revenue came in at CA$94.1 million, against an expected CA$92.2 million. The adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) loss of CA$97.7 million were much higher than the expected CA$63.8 million loss. (Source: “Cannabis producer Canopy Growth slips after a disappointing earnings report (CGC),” Markets Insider, June 21, 2019.)
Which isn’t to say that it was all bad.
Canopy Growth registered annual net revenue growth of 191% to CA$226.3 million, with CA$140.5 million of gross revenue generated from Canadian recreational marijuana sales and CA$78.9 million in global medical marijuana sales. (Source: “CANOPY GROWTH CORPORATION REPORTS FOURTH QUARTER AND FISCAL 2019 RESULTS WITH ANNUAL SALES OF$226.3M,” Canopy Growth, June 20, 2019.)
The company’s fourth-quarter revenue growth was a tad slow, at 13% over the third quarter, but gains are gains. Its Canadian harvested cannabis is expected to increase to approximately 75,000 pounds in Q1 fiscal 2020.
So it wasn’t a total disappointment for Canopy Growth, but CGC stock was still shocked hard by the expectations miss.
The losses were attributed to investments in sales and marketing, as well as general and administration expenses.
“With more product formats coming to the Canadian market later in the year, we are working hard to ensure that we are ready to hit the ground running with products, formats and brands that Canadians trust,” said Bruce Linton, co-CEO of Canopy Growth. (Source: Ibid).
What I expect to see on June 24 is a bounceback. Usually we see two to three percentage points gained in the wake of a massive drop-off like the one we saw today.
If, however, we see a continued decline on Monday, that means the situation is more serious than just an aberration, and investors may be losing confidence in Canopy Growth stock. While I don’t think that will happen, it is possible.
This represents the first real challenge for CGC stock, which has otherwise enjoyed a very strong 2019. How the market responds on Monday will be very telling.
Tilray Inc (NASDAQ:TLRY), like most other pot stocks, fell today in early-morning trading, but that did little to wipe out what has been a stellar week for the stock.
Tilray stock fell by a little over one percent in early-morning trading, but the stock finds itself up 25% over the past five days.
There wasn’t much in particular that motivated the rise, other than something I’ve long been predicting: Tilray stock hit its nadir and now investors are ready to invest in the company with renewed vigor.
I have long said that TLRY stock had the potential necessary to be a winner, but it would take a long period of losses in order to reach an equilibrium after its speedy gains following its initial public offering.
While I thought that Tilray stock would likely fall a bit further below $40.00 before hitting the trough, it appears that I was being overly pessimistic. Now we’re seeing investors jump back into the stock in force. This could be the beginning to a very strong run for the stock.
CGC and TLRY Stock Performances
The performances of CGC stock (black line) and TLRY stock (blue line) over the past week are seen on the chart below:
Chart courtesy of StockCharts.com
The marijuana news today is a little all over the place.
In politics, we have a couple of solid—if unspectacular—wins in New York and Maine. The pot stock market, meanwhile, is experiencing a down day, but TLRY stock has surged recently.
The marijuana market continues to be volatile, but these stocks are jam-packed with potential, and single-week rebounds and gains exceeding 20% are hardly anomalies in this industry.