Marijuana News Today: Talk of Overvaluation Continues

Talk of Overvaluation Continues
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Marijuana News Today

The most damaging word in the marijuana industry at the moment is “overvaluation.”

The marijuana news today is that this continues to be a problem, with some analysts spreading prophecies of doom and bubbles, which is working to prevent a much-needed bounceback in the industry.

Having said that, some companies have begun to see their fortunes change as investors grow more comfortable with the discounted share prices.

Several analysts have spent the last few days proclaiming that there is a bevy of overvalued marijuana stocks currently on the market. This is precisely the kind of thinking that first set off the correction that the industry has been stuck in since the beginning of the year.

Their fears are not unfounded, of course, but they are—in my view—shortsighted.

This type of talk can be extremely damaging to a company’s stock value, especially when the company is specifically called out, versus more generalized criticisms of the marijuana industry.

As talk of overvaluation continues to percolate in the marijuana news today, the industry will have a tough time freeing itself from the pullback in 2018.

But I believe that this talk will not last much longer. As the Canadian marijuana legalization date approaches, we’re going to see positive talk about the marijuana industry resume.

While some will point out that there is still a valuation disparity, what those calculations often fail to take into account is the international marijuana market that will open up eventually—and that “eventually” could come sooner than we think.

For instance, should a country like Germany make significant headway toward recreational marijuana legalization (a plausible event in 2018), we’re going to see a massive spike in stock value.

And while Germany—the largest market in Europe by both wealth and population—may or may not make a move on marijuana legalization in 2018, the country is going to open up to the drug at some point. It’s a matter of playing the waiting game.

So, yes, marijuana stocks are overvalued if you look only at currently available markets. But with so many countries passing new laws on marijuana, and the global attitude toward the drug rapidly shifting, it’s clear that marijuana stock valuations only scratch the surface of the true potential of cannabis.

Canopy Growth Stock

As always, here’s a roundup of the marijuana news today as it pertains to specific stock movements.

First up is Canopy Growth Corp (OTCMKTS:TWMJF, TSE:WEED).

Chart courtesy of StockCharts.com

The industry leader is up a few percentage points over the past five days, in keeping with May’s muted movements so far.

Canopy stock hasn’t been very active this month, at least not yet.

A long-term concern for Canopy Growth stock, however, is that Aurora Cannabis Inc (OTCMKTS:ACBFF, TSE:ACB) continues to make aggressive acquisitions, potentially challenging Canopy stock for market cap dominance in the weed industry.

The latest rumors have placed Aurora in talks with MedReleaf Corp (OTCMKTS:MEDFF, TSE:LEAF), with eyes toward a deal. Such a move would dramatically increase Aurora’s market cap and bring it one step closer to challenging Canopy stock.

Aphria Stock

Aphria Inc (OTCMKTS:APHQF, TSE:APH) has had a rough 2018, down about 40% year-to-date.

The company has been the victim of overvaluation talk, especially after its massive run at the end of 2017, when it gained triple-digits in stock value in a few short months.

Now, however, the company’s fortunes may finally have returned.

I have long put APHQF stock on my list as a high-risk/high-reward stock for 2018 as investors have been waiting for the value to bottom out before reinvesting.

Chart courtesy of StockCharts.com

Over the past five days, the company has soared by nearly 12%, perhaps meaning that the time has come to get back into Aphria stock.

This, however, could be a outlier, and we may see a pullback hit again in a few days. But, if the gains prove sustainable for a week or more, Aphria stock could be poised for a big comeback.

Cronos Group Stock

Cronos Group Inc (NASDAQ:CRON) is the most glaring example of a company that was said to be overvalued and then suffered on the market as a result.

To understand the power that these analysts have over share prices, consider that Cronos Group stock recently released a very impressive quarterly report with massive growth in revenue and sales. The problem? The company appeared to be overvalued, according to several metrics.

Despite the company’s strong earnings report, Cronos Group stock has been hammered in May, down about 10% over the past week.

CRON stock has been one of the best performers in 2018 before the claims of overvaluation were first levied at the company.

Cronos joined the Nasdaq in 2018, becoming the first pure-play marijuana company to do so, benefiting greatly from the move.

Cronos Group stock is now perhaps in one of the worst positions in the marijuana industry at the moment. The company being singled out is unlikely to subside in the near future.

CRON stock bulls might want to wait before reinvesting until this dark cloud passes over the company.

Analyst Take

Analysts may not be high on the marijuana industry right now, but this summer is shaping up to be a strong one for marijuana stocks.

While talks of overvaluation will continue for the foreseeable future, I believe that this summer will turn everything around for the industry.

Not to mention, as these stocks get hammered, they eventually bottom out and present great opportunities for investors. Aphria stock may be in exactly that situation, showing that, even in downtimes, there’s still money to be made in the marijuana market.