Marijuana Penny Stocks Surge
The marijuana stock market will likely see many surges in the future as weed stocks hit bargain prices and new investors begin to take notice.
Pot stocks saw double-digit gains in a single day this week, speaking to the massive potential remaining in these companies. On top of that, the outlook for weed stocks is still just as bright as ever.
Several cannabis stocks that I’ve been bullish on for years have seen strong gains recently. OrganiGram Holdings Inc (NASDAQ:OGI), Hexo Corp (NYSE:HEXO), and CannTrust Holdings Inc (NYSE:CTST) are all valuable marijuana penny stocks that have been experiencing surges.
OGI stock went up 13% in a single afternoon, leading the pack of these strong-performing penny stocks on November 19. HEXO stock similarly made a strong showing that day, going up 12.5%. CTST stock also saw strong gains, if to a lesser degree, at about six percent.
And then you have industry stalwart Canopy Growth Corp (NYSE:CGC) also being swept up in the rally, gaining five percent on November 19.
So what’s motivating these gains? Frankly, it’s the aforementioned bargain prices that the stocks are currently trading at. This year has seen many pot stocks hit prices that are steals for new investors, especially when you consider the long-term outlook for the marijuana sector.
Companies like OrganiGram, Hexo, and Canopy Growth have solid fundamentals, combined with positions of power in a growing industry.
Each of these companies has strong supply contracts with provincial governments across Canada, meaning they will be supplying pot (and thereby scoring recurring revenue) for years to come.
And then you have wildcard companies like CannTrust, which has been on a downswing following trouble with regulators in Canada. But those troubles will not be eternal, and since CTST stock has sunk to an extremely low price, the chances for high gains are growing with each passing day.
The overall effect, then, is that there are several marijuana penny stocks—as well as more established pot stocks—that will be able to rally in 2020 and beyond (especially starting from their current prices).
Why the Future of Marijuana Stocks Is So Exciting
The thing about bargain-priced marijuana stocks is that they are still packed full of potential.
One of the reasons we have seen a pullback in the marijuana stock market is that cannabis companies have not been able to hit the financial numbers that were projected by analysts following Canadian marijuana legalization.
There are a number of reasons for this, and none of them are really the fault of the pot companies themselves. In particular, the rollout of Canadian marijuana legalization was fumbled in several important ways.
In Ontario, for instance, the most populous and richest of the Canadian provinces, very few brick-and-mortar stores have been allowed to legally open. That means marijuana consumers have been forced to either order online, trek far and wide to find one of the few legal storefronts, or go back to the illegal dealers they had been seeing for years.
This has been detrimental to legal pot companies and, by extension, to marijuana stocks.
Studies have shown that the majority of marijuana sales remain confined to the black market, and that is mainly due to the lack of pressure from governments and law enforcement on the illicit dealers. That leaves legal marijuana businesses to compete with black-market dealers and their impossibly low (no taxes or compliance costs, after all) prices.
But this problem won’t last forever. More legal storefronts are being opened in Ontario. On top of that, marijuana producers are finding ways to cut costs in order to compete with the black market.
If the authorities won’t do their job, then marijuana companies will have to work harder to subvert the black market. And they’re doing just that.
Once the majority of pot sales move from the illicit market to the legal market, we can expect revenue at the legal companies to hit their formerly projected numbers. If they can hit those numbers in the near future, then marijuana stock prices will likely reach their former highs.
Right now, that means share-price growth of 50%, 100%, and—in some cases—300% or 400%. Many pot stocks have the ability to attain their top value once again (and in the near future). We’re potentially talking a year or two from now.
OGI stock and HEXO stock are among my top marijuana penny stocks that I could see easily tripling in price in the next two years as they surge back to prominence.
Both companies have strong supply contracts (especially Hexo; it has a very lucrative, long-term supply contract with the Quebec government) and both stocks are extremely well priced at the moment.
I foresee big things for OGI stock and HEXO stock, anywhere from 20% to 100% gains in 2020 (depending on the market).
And all these strong projections are being made without even talking about the elephant in the room: federal U.S. marijuana legalization.
With many of the potential Democratic Party presidential candidates supporting marijuana legalization, there’s a good chance that, by 2021, we’ll be seeing marijuana legalization in America.
When that happens, the stock-price surges that took place following Canadian marijuana legalization will seem like a pittance. Pot stocks could skyrocket on the back of the richest market in the world opening up to legal marijuana sales.
With all the momentum behind the cannabis industry while stock prices remain so low, I have little doubt that future gains await investors.
The cannabis sector is looking strong as marijuana penny stocks rally this week. These types of rallies are going to be normal as the industry recovers from a recent downturn and surges upward.
Furthermore, the current marijuana stock prices are still so low that there is huge potential for gains as the industry continues to expand globally. As a result, my long-term outlook for pot stocks is bullish.