Marijuana Stock Market: These 5 Pot Stocks Could Rise in October

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iStock.com/Ekaterina Aleshinskaya

Marijuana Stock Market News

Starting on October 17, the marijuana stock market will prove whether the hype around pot is legitimate, or whether it will go up in smoke. That’s when recreational marijuana in Canada becomes legal.

This will open the door for investors to profit from the Canadian market, international markets (like Germany and Australia), and—eventually—the United States.

Below are five of the best marijuana stocks that will likely do well in October 2018.

The marijuana market—both medicinal and recreational—is about to explode. The big question is, will the marijuana sector be as hot as analysts are forecasting, or will it fizzle? As mentioned above, on October 17, the recreational use of marijuana becomes legal in Canada, the first industrialized country in the world to do so.

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While Canada is a small market, about the size of California, Canadian marijuana companies see Canada as just the start; they are also eyeing international expansion. They expect the legal use of recreational cannabis to open up internationally in the coming years, significantly boosting their retail marijuana sales.

The 500 million inhabitants of Europe are expected to be able to legally get their hands on recreational marijuana in the next few years. Meanwhile, the U.S., the biggest economy in the world, could legalize the recreational use of cannabis within five years.

The U.S. is already well on its way on the state level: medical marijuana is legal in 30 states, with more expanding their medical programs. On top of that, nine states and Washington, D.C. have already legalized the use of recreational weed.

And support for the legalization of cannabis in the U.S. is growing every day.

A recent poll by Gallup, Inc. revealed that a record number of Americans (64%) are in favor of legalized weed; even a majority of Republicans (51%) support the idea for the first time. When the question was first asked by Gallup in 1969, just 12% of Americans backed the idea of legalizing marijuana.  (Source: “Record-High Support for Legalizing Marijuana Use in U.S.,” Gallup, Inc., October 25, 2017.)

Legal Marijuana Sales

Even without the U.S. on board yet, retail marijuana sales have been nothing short of spectacular.

According to one report, legal marijuana sales soared to $9.7 billion in North America in 2017. That’s a 33% increase over 2016. By 2022, global spending on legal marijuana is expected to hit $32.0 billion. (Source: “New Report: Legal Marijuana Markets Projected to Reach $23.4 Billion, Employ Nearly a Half-Million Americans by 2022; Effective End of Federal Prohibition is in Sight,” The Arcview Group, June 28, 2018.)

According to a different report, the legal marijuana market is expected to grow at a compound annual growth rate of 34.6% over the next seven years. Over the next 13 years, the marijuana sector is forecast to expand at an annual growth rate of 19.75%. (Source: “Legal Marijuana Market Worth $146.4 Billion by 2025 | CAGR: 34.6%,” Grand View Research, last accessed October 4, 2018.)

Best Pot Stocks for October 2018

So, which marijuana stocks should do well in October, and even in the long run?

Interest in marijuana stocks and the entire marijuana sector is almost unprecedented. While there is massive potential, the industry is still in its infancy. The only retail sales that even the biggest pot companies have reported are medicinal. That’s about to change.

As is often the case, a rising tide lifts all boats. Investors, afraid to miss out on the next big thing in the marijuana sector, have sent the vast majority of marijuana stocks sky-high. Even under-the-radar cannabis penny stocks have been doing well.

Canopy Growth Corp

It might seem obvious to pick Canopy Growth Corp (NYSE:CGC) as one of the marijuana stocks that could perform well in October 2018. But with the legal cannabis industry just getting warmed up, it makes sense to look at the biggest marijuana player in the sector.

Unlike most marijuana stocks, Canopy Growth trades in both Canada and the U.S., meaning it has a lot more exposure and volume.

With a market cap of $10.9 billion, Canopy has 10 cannabis production sites, with over 2.4 million square feet of production capacity—including over 500,000 square feet of good manufacturing practices (GMP)-certified production space. The company also has operations in eight countries in five continents.

In addition to already having a number of established partnerships, Canopy Growth announced a multi-billion-dollar deal with Constellation Brands, Inc. (NYSE:STZ), paving the way for globally available cannabis-based drinks. (Source: “Constellation Brands to Invest $5 Billion CAD ($4 Billion USD) in Canopy Growth to Establish Transformative Global Position and Alignment,” Canopy Growth Corp, August 15, 2018.)

Aurora Cannabis Inc

Aurora Cannabis Inc (OTCMKTS:ACBFF, TSE:ACB) has a lot going on, and October 2018 could be an especially good month for the Vancouver-based cannabis company. Not only is it a great marijuana stock, but the company is looking to get listed on a major U.S. stock exchange by the end of the month. (Source: “Aurora Cannabis plans U.S. stock listing in October,” Reuters, September 20, 2018.)

Exposure to U.S. investors has certainly not hurt marijuana companies like Canopy Growth or Tilray Inc (NASDAQ:TLRY).

Aurora Cannabis, which trails only Canopy and Tilray by market cap, has operations in 18 countries, seven licensed production facilities, five sales licenses, and a funded capacity of over 500,000 kilograms (1.1 million pounds) of cannabis production per year.

In the fourth quarter of 2018 (ended June 30), Aurora announced that revenue soared 223% to CA$19.1 million. The company also reported a fourth-quarter net income of CA$79.3 million. In contrast, in the fourth quarter of 2017, Aurora reported a loss of CA$4.8 million. In the third quarter of 2018, it reported a loss of CA$20.8 million. (Source: “Aurora Cannabis Inc. Announces Results For The Fourth Quarter And 2018 Fiscal Year,” Aurora Cannabis Inc, September 24, 2018.)

Thanks to Aurora’s aggressive acquisition strategy, it’s poised for solid, long-term growth as well. It completed 11 acquisitions in 2018 and has another one in the works. Two of its biggest acquisitions were the purchase of CanniMed Therapeutics Inc. for $852.0 million and MedReleaf Corp. for $2.5-billion.

CannaRoyalty Corp

CannaRoyalty Corp (OTCMKTS:CNNRF, CSE:CRZ) is a private equity firm that has funded a number of revenue streaming deals with Canadian marijuana growers.

Its holdings include Anandia Labs, Bodhi Research, BAS Research, GreenRock Botanicals, DermaLeaf Skincare, Soul Sugar Kitchen, Best Buds Animal Health, and Freya Intimacy Spray. (Source: “About Us,” CannaRoyalty Corp, last accessed October 4, 2018.)

While some of these acquisitions are based in Canada, many are located in the United States. In fact, CannaRoyalty is now the largest distributor of legal marijuana products in California.

The potential for marijuana sales in Canada is big; in California, it’s huge. If California was a country, it would have the fifth-largest gross domestic product (GDP) in the world.

The pot sector is booming in California. In January, California became the world’s largest regulated cannabis market. (Source: “California’s recreational cannabis industry is booming — but regulations are posing a unique threat,” Business Insider, August 28, 2018.)

The total Canadian marijuana market is projected to be approximately $5.5 billion by 2022. In comparison, California’s marijuana market is expected to top $7.7 billion that same year.

As such, CannaRoyalty is set to become the largest distributor in the largest marijuana market in the world.

Hexo Corp

Hexo Corp (OTCMKTS:HYYDF, TSE:HEXO) produces and supplies medical marijuana products and is set to take advantage of the legalization of recreational marijuana in Canada.

The company currently operates over 310,000 square feet of production capacity, with construction on another 1,000,000 square feet set to be complete by the end of 2018.

Over the last two months, Hexo announced that it acquired an interest in a 2,004,000-square-foot facility in Belleville, Ontario and that the company was awarded a three-year distribution contract for online recreational cannabis distribution in Quebec.

Hexo also announced its first foray into the European cannabis market, establishing a eurozone processing, production, and distribution facility center in Greece. This move will allow Hexo to supply its full suite of products in France, the United Kingdom, and other European markets (once regulations permit so).

Another reason to like Hexo is that, this past summer, it announced a joint venture with Molson Coors Brewing Co (NYSE:TAP) to make cannabis-infused beverages. This is expected to be a $600.0-million-a-year market by 2022. (Source: “Molson Coors Canada and HEXO Announce Agreement to Create Joint Venture Focused on Non-Alcoholic, Cannabis-Infused Beverages for the Canadian Market,” Molson Coors Brewing Co, August 1, 2018.)

Tilray Inc

Tilray Inc is the second-largest marijuana stock by market cap, at around $14.6 billion. It’s also the most volatile marijuana stock right now.

The company only went public back in July, with an initial public offering (IPO) price of $17.00 per share. It also had a limited offering of just nine million shares.

The Canadian company went public on the Nasdaq—giving it immediate exposure to U.S. investors. Investors meanwhile were attracted, in part, to the fact that Tilray is a pure-play marijuana producer.

It was the perfect storm for supply and demand, and it’s been all uphill since then (mostly).

Tilray’s share price advanced on the looming legalization of weed in Canada, investor optimism, and news of an agreement with the U.S. Drug Enforcement Administration (DEA).

On September 19, Tilray’s share price touched $300.00, a 1,664% increase over its July IPO price. This also made Tilray, for a short period of time at least, the most valuable marijuana company in the world, with a market cap north of $20.0 billion.

Just three trading days later though, on July 24, Tilray’s share price retraced to $100.00 per share. That hasn’t scared investors away though.

Tilray is a huge company (it harvested seven metric tons of cannabis in 2017) with a strong international presence in an industry that is just opening up.

The company has only been in existence for two years, but it has a history of strong revenue growth.

In the second quarter of 2018, ended June 30, Tilray announced that its revenue increased 95.2% year-over-year to $9.7 million. The second quarter net loss widened to $12.8 million, from $2.4 million in the same prior-year period. (Source: “Tilray, Inc. Reports Second Quarter 2018 Earnings,” Tilray Inc, August 28, 2018.)

As you can see, Tilray has also been burning through a lot of money. Investors, though, know there’s a lot more where that came from.

Peter Thiel’s Privateer Holdings backed Tilray with a massive $12.0-billion stake. Not only does this give the company a huge influx of cash, but it also gives it access to Thiel’s expertise and connections—which could help it finance future growth. (Source: “About,” Privateer Holdings, last accessed October 3, 2018.)

Thiel, who is only 50, was an early investor in Facebook, Inc. (NASDAQ:FB). He has also backed Airbnb, Inc., Lyft, Inc., Space Exploration Technologies Corp., and Palantir Technologies Inc. Some of those companies have done well.

Tilray, like the broader marijuana sector, will remain volatile. But investor optimism and new announcements could send Tilray’s share price higher this month.