Marijuana Stocks 2018 Update
We’re only two months into 2018, but the year has already been a wild one for marijuana stocks. Between the massive surge that most companies felt in early January to the slump that has developed since, the notorious volatility of the cannabis stock market has been in full effect. Marijuana stocks in 2018 have shown why the industry has so many arduous fans and steadfast doubters—the quickfire movements both up and down are enough to make all but the most stoic of investors blush at least a little bit.
We’ve seen stocks climb dozens of percentage points in weeks only to give it all back in a few short days, only for the process to repeat itself again in no time. Again, this kind of action is what draws so many investors to the industry. Whether you’re a short-term buyer, a short seller, or a believer in it for the long haul, there are ways to make money by using any of those strategies.
For this piece, I’d like to examine some of the biggest players in the industry and evaluate their year so far. While marijuana stocks in 2018 still have a long way to go, this piece will look at January and February for some of the biggest names in the industry.
Marijuana Stock Chart
Chart courtesy of StockCharts.com
Canopy Growth Stock
Canopy Growth Corp (OTCMKTS: TWMJF), (TSE:WEED) is still the largest marijuana company by market share and, as such, it makes sense to start with it.
As Canopy goes, so too does the industry. While not a hard and fast rule, it’s still a pretty solid principle to make judgments on. Canopy stock growth or trouble is usually a good predictor of the state of the industry at large. With a $4.39-billion market cap, the company is the biggest fish in the sea and the guppies usually follow in its wake.
WEED stock is up about 30% since the beginning of 2018, making it one of the stronger performers of the year.
The company’s stock was bolstered by a very impressive quarterly report, which brought in stellar numbers: Year-over-year registered patient growth was 138% and revenue went up by triple digits, jumping 123% to reach CA$21.7 million, up from CA$9.8 million.
Canopy was also able to reduce the cost of production with the weighted average cost per gram to point of harvest decreasing 18% quarter-over-quarter.
Quarterly revenue also ascended, even if sales missed analyst projections of CA$24.2-million. (Source: “Canopy Growth Reported Losses in 3Q18 despite Surging Sales,” Market Realist, February 14, 2018.)
Another bit of good news for Canopy came by way of inking a two-year agreement with Sunniva Inc (OTCMKTS:SNNVF) to purchase up to 90,000 kilograms of dried cannabis from the company.
“We welcome Sunniva to the Canopy Growth family and look forward to collaborating with their team to provide a steady and high-quality source of cannabis products for consumers,” said Mark Zekulin, President of Canopy Growth, in a statement. (Source: “Canopy Growth Signs Significant Supply and Sales Agreement with Sunniva Medical Inc,” Cision, February 21, 2018.)
“Through provincial distribution channels, brick and mortar locations, and our online Tweed Main Street e-commerce platform we are diversifying our ability to deliver a one-stop shopping experience to consumers and provincial bodies alike. With partners like Sunniva, we are well positioned to capture market share through robust supply channels.”
Canopy rode the recent good news to an 11% boost on February 20, again showing just how much can be gained and lost in a single day in this industry.
The remainder of the week hasn’t been as kind to Canopy, but ultimately, Canopy stock in 2018 has made impressive moves both in terms of value and on the business side of things, and that’s in spite of a tough go of it in January, where the company lost as much as 30% of its stock value in a single week.
Aphria Inc (OTCMKTS:APHQF), (TSE:APH) was one of the harder-hit companies last week, dropping around nine percent. As far as marijuana stocks in 2018 go, APH has been one of the harder-hit tickers out there.
APH stock has dropped about five percent on the year, which is not terribly unusual in 2018, but still puts it at the bottom of the pack when it comes to the industry’s biggest players, many of which have made substantial—if uneven—gains this year.
While APH enjoyed a six-percent spike on February 20, not unlike Aurora, the remainder of the week was rather dismal, with all those gains being given back until it dropped about two percent overall when all was said and done.
My biggest concern with APH stock has to do with its bid to acquire Nuuvera Inc (OTCMKTS:NUUVF), (CVE:NUU).
The companies first announced in January that Aphria would be looking to buy Nuuvera, but the deal has since seen a massive reduction in value, with Aphria lowering the acquisition cost from $1.00 per share to $0.60. Both companies’ stock value suffered as a result.
It was a strange move with no credible reasoning given to the public as to why the reduction took place. Nuuvera claimed to agree to the new reduced-price deal with Aphria because it is looking to fully acquire its subsidiary, Avanti Rx Analytics. But receiving less money is not going to make an acquisition more doable. It’s a bizarre addition to this deal that is perhaps part of the reason both companies are suffering on the market.
Nuuvera is looking to purchase the remaining 49% of Avanti for an estimated CA$43.0 million.
“The acquisition of Avanti is an important step in the history of Nuuvera and is expected to result in synergies at the combined Nuuvera/Aphria which will enhance the value of the arrangement to shareholders of Nuuvera,” said Ronald Schmeichel, Nuuvera’s chairman, in a statement. (Source: “Aphria reduces cash in bid for Nuuvera,” CBC, February 20, 2018.)
The original agreement between Aphria and Nuuvera was valued at CA$826.0 million, according to a release from the companies. The new deal has been reduced heavily to a value of CA$447.9 million.
With a $1.7-billion market cap, APH stock is still one of the bigger players in the industry, but considering the success we’ve seen in other marijuana stocks in 2018, APH seems like it may be falling behind the pack for now.
Aurora Cannabis Inc
Aurora Cannabis Inc (OTCMKTS:ACBFF), (TSE:ACB) has had the best 2018 of the bunch listed here, and among the top players in the marijuana industry, has probably had the most promising start to the year yet.
The company’s cap of $3.83 billion makes it one of the biggest marijuana companies around.
It also had an impressive Q2 earnings report come out in February.
As my colleague noted in an earlier article, there’s a lot to be excited about for ACB stock.
The company set a new monthly record of sales in November, with about CA$3.1 million worth of cannabis shipped over the course of the month.
A second boon to ACB stock is that it’s poised to become the largest producer of marijuana in Europe later this year.
I have always been bullish on companies that seek to expand the scope of their marijuana sales beyond the borders of their home nation, and that goes double for Canadian marijuana stocks. It’s easy to be passive as legalization approaches, but proactive and hungry companies are going to be the ones that have the potential to be dominant, not just in the short-term run following Canadian legalization, but for years to come.
Aurora Cannabis stock also benefited from orchestrating and completing the largest deal in Canadian marijuana with its $1.1-billion acquisition of CanniMed Therapeutics Inc (OTCMKTS:CMMDF), (TSE:CMED) after a month-long bitter back-and-forth.
After months of trying—even gong for a hostile takeover at one point—the Aurora Cannimed deal was finally inked.
All that good news compounds upon what has already been a very impressive two months for ACB stock.
The company has soared over 50% since the beginning of the year, making it one of the stronger performers in the marijuana industry at large. That distinction is made all the more impressive by the company’s already strong market cap position, making it not only large and powerful but able to grow with pulse-thumping speed as well.
This year has been anything but predictable so far. Ups and downs have long marked the marijuana stock market, but the volatility in 2018 has been particularly jarring.
But again, this is nothing new to veteran marijuana stock investors. The industry is known for strong swings and will continue to behave in that manner for a good while yet. It comes with the territory of being an exciting, emerging market.
At the same time, 2018 carries with it so much promise for the future of marijuana stocks: Canadian legalization, expansion in Europe and the U.S., new companies, ETFs, etc.
Which is to say that despite it not having the best start out of the gate, I’m still bullish on the marijuana industry in 2018, especially for the summer when Canadian legalization is set to hit.