Marijuana News Today
The marijuana news today brings a healthy injection of hope back into the stock market as it reveals once again why people are so high on the future of pot. The big story today is the enactment of South Korea marijuana legalization.
South Korea has become the first Asian country to legalize medicinal marijuana, kicking off what is sure to be an explosion in the marijuana stock market. (Source: “Cannabis Canada Daily: Another day, another U.S. state closer to legalizing pot,” BNN Bloomberg, November 27, 2018.)
I have long championed the importance of international expansion when it comes to the marijuana sector. And it’s easy to see why: marijuana stocks are making strong rallies following the news of the South Korean marijuana legalization.
Future international expansion is the primary reason that I’m always perplexed as to why analysts keep deeming marijuana stocks as overvalued.
Sure, their valuations don’t quite match up with the marijuana market currently available, but when you project just how big the marijuana industry is likely to grow, the current market caps seem downright tiny, relative to the potential that exists.
What bothers investors, of course, is the fact that there is so much uncertainty surrounding the legal cannabis sector. For instance, we have no idea when marijuana companies will gain access to some of the biggest markets in Europe and the U.S.
Another question mark is how long marijuana stocks will have to toil in a downturn while they wait for more countries to see the light and pass marijuana legislation.
Question marks or no, what is undeniable is that there are literally millions of potential marijuana consumers waiting for their countries to green-light pot reform.
Canada is likely to prove to be a catalyst in this regard, as other countries see that the sky does not fall when a government legalizes marijuana. In fact, as tax revenue grows while incarcerations and spending on law enforcement sink, it will be harder for governments to ignore the benefits of legalization.
South Korea is a massive win for the cannabis industry, since it can pave the way for marijuana legalization to further spread across the lucrative markets of Asia. Billions of potential consumers sit untapped in that continent while the legal marijuana business continues to expand with rapidity across the U.S. and Europe.
While I doubt this will be enough to shake the cannabis stock market out of its current correction, it should be enough to spur stocks upward for a few days.
The surge in the marijuana stock market is not being applied evenly today, with many stocks gaining but some faring better than others by a decent margin.
Aurora Cannabis Inc (NYSE:ACB) was one of the better performers this morning, jumping by about four percent. This is going to help offset what has otherwise been a down week for the company; ACB stock lost about five percent in value over the past five days.
Aurora stock has been tricky during this recent pot stock correction—and, in fact, during much of 2018. Aurora has long tried to challenge its biggest rival, Canopy Growth Corp (NYSE:CGC), via acquisitions and other aggressive market plays.
That has largely not paid off for ACB stock, which has seen a weak year so far, especially when compared to the success of CGC stock. As such, it is hard to recommend Aurora stock over Canopy Growth stock.
While both companies are set to see losses during the current market pullback, I imagine that Canopy Growth will be the long-term winner over Aurora. That’s mainly due to Canopy’s more sage and less risky business ventures, not to mention its more globally-minded expansion plans.
This doesn’t mean that Aurora is a dud, but it does mean that the stock has an uphill battle in finding value compared to its closest rival, Canopy Growth.
Another company that is doing well today but has faltered for much of 2018 is Aphria Inc (NYSE:APHA). APHA stock gained 7.5% in early-morning trading today, but still finds itself down about six percent over the past five days.
When I first began reporting on marijuana stocks back in October 2016, Aphria stock was among my favorites, due to its size and growth potential.
While investors who heeded my advice back then would have seen remarkable gains for a couple years, it is becoming increasingly clear to me that APHA stock is now one of the weaker marijuana stocks.
The stock has simply been unable to recover from being labelled “overvalued” earlier in 2018.
While we are likely to see more wild upswings like the seven-percent gain we’re seeing today, Aphria stock is better suited as a short-term trade, due to its inability to make sustainable gains in 2018.
ACB and APHA Stock Performances
The ACB stock (black line) and APHA stock (blue line) performances from the past week are seen on the chart below:
Chart courtesy of StockCharts.com
The future of the legal cannabis industry is global, as can be seen in the marijuana news today about South Korea.
As more countries legalize pot, we’re likely to see jumps in value across the marijuana stock market, which will help offset the correction. That correction will eventually end completely once more major countries legalize marijuana or we see a massive investment hit the industry.