Can These Marijuana Stocks Recover?
Cliches are cliches for a reason: they’re often true, or at least,contain a nugget of truth.
“Buy low, sell high.” We’ve all heard it and, at this point, it’s more groan-inducing than anything. But right now, a couple of marijuana stocks seemed poised for a rebound after having had rough runs over the past year. Are Tilray Inc (NASDAQ:TLRY) and Aphria Inc (NYSE:APHA) ready for comebacks?
First, let’s compare Tilray stock and Aphria stock to the rest of the cannabis industry.
Chart courtesy of StockCharts.com
As can be seen in the chart above—which has Cronos Group Inc (NASDAQ:CRON), Canopy Growth Corp (NYSE:CGC) and Aurora Cannabis Inc (NYSE:ACB) for comparison—Aphria and Tilray are both lagging behind their competitors.
While most major pot stocks have seen upwards of 40% gains this year, APHA stock has only shot up about 20%, while TLRY stock has actually lost 30%. So it’s safe to say that these two pot stocks, both at times among the most promising in the entire market, have disappointed.
Chart courtesy of StockCharts.com
But both have also been able to turn things around recently, having seen moderate gains over the past month. Those gains are made all the more impressive considering just how poorly the overall industry has performed in June.
Furthermore, Tilray has seen huge gains in recent weeks, jumping by over 20% in the span of a few days.
Does this mean that things are turning around for these two stocks? Is it time for investors to jump back in? I believe that the best course of action is to wait—but not too long, because these companies may offer some of the best ceilings in the entire marijuana industry.
Tilray Stock Forecast
Let’s begin with the TLRY stock forecast. For a long while, I’ve said that once Tilray stock hits its bottom, things will turn around rapidly for the company.
After its huge run following its initial public offering, a long period of sustained losses took place. I always argued that once a bottom was reached, investors would come back in droves.
While I was right in my prediction, I was off in terms of when it would happen; I though the bottom would be closer to $30.00 per share. But once TLRY stock started trading around $40.00 per share (a huge decline from its former three-figure price), things turned around.
Now, I’m not entirely sold that these gains are sustainable. In fact, I’d caution investors to be wary of getting too giddy after seeing the huge growth spurt that took place recently and jumping all in on Tilray Inc too soon.
But there is definitely potential in the company. And frankly, this may be the start of its recovery. If it is, then now would be the time to consider this stock.
I think there will be a few more stutters before a full-on comeback begins, but for those who are willing to stomach some risk, investing in TLRY stock now may pay off huge down the line.
The company recently made headlines for its ongoing expansion in the UK market.
“As demand ramps up in the U.K., Tilray is well positioned to be a leading supplier of medical cannabis products,” said Sascha Mielcarek, Managing Director of Tilray Europe. (Source: “Tilray Imports Bulk Supply of Medical Cannabis Oil into the United Kingdom,” Financial Post, June 25, 2019.)
“Regulations are progressing as more and more countries across Europe are recognizing the benefits of medical cannabis and its potential to improve patients’ quality of life.”
There is definitely potential locked within the company, not to mention that it is a prime target for a large partnership. So I would certainly consider Tilray stock to be a high-potential marijuana company; I could see the company hitting $50.00 per share by the end of 2020 and holding.
Aphria Stock Forecast
Aphria Inc is in a similar boat as Tilray, but for much different reasons.
Aphria’s decline came by way of legal trouble involving South American assets the company purchased—a deal that activist shareholders and short sellers revealed to be potentially part of a backroom deal to benefit select individuals rather than the company as a whole. (Source: “Aphria shares tumble on low sales, impairment charge on Latin American assets,” Financial Post, April 15, 2019.)
With that mess behind it, however, APHA stock has been able to see some gains in 2019. But my Aphria stock forecast has the company rising much higher than that.
I used to favor Aphria above almost all other companies when I first began covering the industry three years ago. Since then, it has definitely lost my confidence, but it has mounted a number of strong plays that are slowly winning me back.
Those plays essentially amounted to not doing anything too risky considering its position, and that has paid off: the company received an endorsement from Jefferies Financial Group Inc (NYSE:JEF) analyst Owen Bennett in late May.
“On our strategic scorecard Aphria scores highly, and third overall behind only Canopy and Aurora,” said Bennett. (Source: “Aphria leads cannabis stocks higher after Jefferies starts coverage with a buy rating,” MarketWatch, May 27, 2019.)
“Despite its strong global outlook, its valuation is the cheapest across our space, with allegations around inflated assets/insider deals weighing.”
The endorsement sent APHA stock soaring, and I believe that the company is near a shedding of its sordid past in favor of a much brighter future.
As a result, I believe that a 50% gain in the next 12 months is more than possible for Aphria stock, even if it is a little more volatile than other large pot companies.
Both APHA stock and TLRY stock have taken a beating; that goes without question. The question, then, is whether they’ve taken enough of a beating to be once again attractive to investors. My thinking is that they have.
While both companies are risky investments in their current states, both also hold the potential to see big gains in 2019 and beyond.
For those who can stomach the risk and volatility—and want the potential for big returns quick—these two recovering marijuana stocks may be their best bet.