Marijuana News Today
In the marijuana news today we have analysis showing that legal pot is a threat to the alcohol industry (and that’s very big news for marijuana stocks). Meanwhile, the marijuana stock market fell in early-morning trading.
A recent survey by public relations firm Quinn Thomas was analyzed by DataTrek Research, leading to the conclusion that marijuana is indeed a threat to alcohol sales. (Source: “Marijuana Is Legal in More Places and That’s Bad News for Alcohol Stocks,” Barron’s, March 22, 2019.)
This is something I’ve been talking about for a while now, but it’s always good to get hard data to back up your argument.
The survey and analysis show that people who use marijuana will tend to consume less alcohol. Better yet, marijuana users aren’t only young adults and traditional “stoner” types. Rather, a good number of them are middle-income consumers who look a lot like everyone else.
This is really good news for the marijuana industry for one main reason: it scares the alcohol industry.
You see, sales at big alcohol companies in general have been threatened for a while now in North America. That’s partly due to the prevalence of microbreweries and an overall change in people’s consumption habits. Legal marijuana represents yet another blow to the industry—and an opportunity.
Most people are likely to only consume one of the two drugs at a time, forgoing one for the other. In that case, as marijuana becomes legal in more areas, some people will choose pot over booze.
The opportunity, then, lies in capitalizing on this new segment of consumers who perhaps wouldn’t be inclined to drink every night, but are likely to enjoy marijuana on a more regular basis.
Enter marijuana-alcohol partnerships. We’ve already seen several big alcohol companies try to get out ahead of the marijuana threat by acquiring large stakes in marijuana companies or inking big partnership deals.
The most prominent examples are Molson Coors Brewing Co (NYSE:TAP) partnering with Hexo Corp (NYSEAMERICAN:HEXO) and Constellation Brands, Inc. (NYSE:STZ) teaming up with Canopy Growth Corp (NYSE:CGC).
The Canopy Growth deal in particular was enough to send the entire marijuana stock market soaring twice, once during the initial billion-dollar investment and again when the company went ahead with another multi-billion-dollar deal with Canopy less than a year after the first one.
The overall takeaway for marijuana stocks, then, then, is that the threat to alcohol sales represents an opportunity for them to forge strong and financially beneficial partnerships with much larger alcohol companies. The capital injections can help spur growth while also allowing weed companies to tap into more customers via new products like cannabis-infused beverages.
Overall, marijuana companies scaring Big Alcohol is a good thing for share prices.
While the marijuana news today was light on major developments, the marijuana stock market was buzzing with activity to end the week, most of it bad.
We’re seeing declines across the board among pot stocks. There doesn’t appear to be a unifying reason that these pot stocks are falling today, either.
One company that was hit hard in early-morning trading was Aurora Cannabis Inc (NYSE:ACB). ACB stock dropped four percent this morning and finds itself down four percent over the past five days.
This is in stark contrast to last week’s strong run for Aurora, when the company added billionaire activist Nelson Peltz on as an advisor. The move helped spur share price growth, gaining double-digits.
This drop today is perhaps a mini-correction to its speedy gains last week. All the same, this drop will likely be a flash in the pan and I fully anticipate that Aurora Cannabis Inc will bounce back next week. There’s nothing I’ve seen that changes my bullish stance on ACB stock.
Another company that was down in early-morning trading today is Aphria Inc (NYSE:APHA). APHA stock dropped nearly three percent this morning and is up nearly two percent over the past five days.
However, in stark contrast to Aurora, Aphria is among the lesser stocks in the industry, at least in my view.
Aphria is still trying to move past charges of corruption, wherein the company made poor purchases in order to bolster the holdings of a few key people.
While those troubles appear to be in the rear-view mirror, the company hasn’t had a solid win to offset the negativity. Worse yet, it hasn’t really made any significant move that would put it among the other top pot stocks.
While there is money to be made off of APHA stock in day trading, as a long-term buy-and-hold stock, I believe there are far better options available.
The last pot stock we’ll be taking a look at today is HEXO Corp. HEXO stock fell nearly four percent in early-morning trading today, but that is offset by gains of about eight percent over the past five days.
Hexo Corp is still a very strong pick in my opinion, today’s troubles notwithstanding. The company continues to impress with its numbers and savvy business moves.
Not to mention that HEXO stock is among the best marijuana penny stocks available for those looking for high growth potential.
The best part is, while penny stocks traditionally carry with them higher volatility overall, Hexo is a rare company in that it is—on paper, at least—behaving much more like a larger company, with strong fundamentals and deals in place to ensure growth for a long while yet. In other words, I believe that the stock is undervalued.
So gains or no gains today, the future is very bright for HEXO stock.
ACB, APHA, and HEXO Stock Performances
The performances of ACB stock (black line), APHA stock (blue line), and HEXO stock (red line) over the past week are seen on the chart below:
Chart courtesy of StockCharts.com
The marijuana news today is a little slow on the political front and dour on the pot stock market, but nothing that happened today was enough to dampen my enthusiasm for the industry as a whole.
The threat to alcohol sales will likely motivate more companies in that space to invest in pot, meaning more capital and gains could be on the way for marijuana companies.
Meanwhile, the pot stock market took a dive today, but it was not overly severe and I think the industry will bounce back nicely in the days to come.