Marijuana News Today: Last-Minute Pivot to Privatization Could Hurt Pot Stocks Short-Term

marijuana news today 30 july
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Marijuana News Today

In the marijuana news today is the backlash to the fluid landscape of Canada’s marijuana regulation as legalization approaches. This has led some analysts to believe that sales will be hampered by the lack of a concrete framework in several provinces, leading to projection misses and stock value drawbacks.

Much of the focus has been on Ontario, Canada’s most populous province, which recently ousted its Liberal government and brought in a Conservative leader. The switch prompted the new premier, Doug Ford, to radically alter the rollout plan for marijuana within the province. (Source: “80 days from marijuana legalization, retail rollout is still hazy,Financial Post, July 30, 2018.)

Before, the drug was going to be sold through a government-run monopoly, similar to the way the province handles alcohol. But Ford has since come out and said that he would like to see marijuana be under the purview of private enterprise.

While I believe (and wrote) that this would be a boon overall to the marijuana industry for a number of reasons, there is reason to believe that the switch will impact marijuana stocks in the short term.

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With only two-and-a-half months to go until Canadian marijuana legalization, there is heavy concern that such a pivot to privatization will not be able to go through in time.

It’s worth mentioning that many believed there would be supply shortages in the immediate aftermath of marijuana legalization to begin with. This changeover from public to private businesses will only exacerbate that problem.

The other issue is storefront real estate. Again, with such a short time frame, private marijuana sellers are going to be hard-pressed to find, renovate, and staff the requisite number of private marijuana shops.

Not to mention that in cities like Toronto, where a good bulk of marijuana sales are likely to come from, real estate is not only notoriously hard to obtain, but also very expensive, increasing initial investment costs and putting the onus on these shops to have big sales numbers to justify the rent.

The caveat, of course, is that privatization is good for the marijuana industry in the long run. I believe that we’ll see stronger sales numbers over the long term and that marijuana stocks will certainly benefit from the ability to maintain their own storefronts rather than have to go through a provincial middleman.

But there’s going to be a lot of hype surrounding the marijuana industry as October 17 nears. And with that hype, we’re going to see massive swings up and down. The issue is that if the sales numbers do miss by any significant margin, I expect we’re going to enter a deep marijuana drawback.

While the correction will not be permanent and it does not lessen my overall strong projections for the future of the industry, the end of 2018 could be difficult on marijuana stocks should sales figures fall short of expectations.

Marijuana News Today: CGC Stock

In a reversal of recent trends, the marijuana news today is positive on the pot stock market, while politically, it leaves a little more to be desired.

Chart courtesy of StockCharts.com

While marijuana rollout indecision may be a problem in the next few months, Canopy Growth Corp (NYSE:CGC), the black line on the chart, has registered its first solid week in some time, up about four percent since last Monday.

Much of those gains are coming in today, with Canopy gaining virtually all of that four percent during early morning trading. However, it’s still worth noting that it ended up not taking heavy losses last week.

July has not been a kind month to marijuana stocks across the board, with CGC stock being one of the hardest hit. But the company is starting this week strong, and hopefully will carry those gains into August.

The marijuana correction that has been in place for much of July will eventually disappear, as they always do, but the question of timing is important.

I believe that by mid-September, we will be seeing strong gains as hype builds toward Canadian marijuana legalization, with August having the potential to be a strong month if investors look to invest early before the hype train truly gets rolling.

CRON Stock

While Canopy Growth stock is enjoying strong gains this morning, Cronos Group Inc (NASDAQ:CRON), the blue line on the above chart, is having a lesser taste of that success.

CRON stock is up about one percent in early morning trading, and down about three percent over the past week.

Cronos stock has been one of the better performers throughout the recent marijuana correction, able to weather the storm better than many of its competitors.

Still, Cronos has a great many question marks surrounding it long-term compared to Canopy, in my view, making it always a riskier proposition in comparison.

Having said that, over the course of July, we saw CGC stock tumble 13%, while CRON stock only fell a couple points, making the latter perhaps the safer pick as we wade through this marijuana drawback.

Tilray Stock

And in what should come as a surprise to absolutely no one, Tilray Inc (NASDAQ:TLRY), displayed on the chart above via the red line, is down about 15% over the past week.

This was to be expected, as the first marijuana company to have an initial public offering (IPO) on the Nasdaq shot up meteorically by nearly 80% in its first week on the public markets. Such a massive spike in value was unsustainable, and now we’re beginning to see the pullback.

I doubt that all of or even most of its gains will be wiped out when the Tilray stock correction is through, but we are going to see a drop in value.

TLRY stock is still up 45% since the IPO in mid-July, but I believe that the window to eke out massive gains from the stock may now be closed.

Analyst Take

The marijuana news today demonstrates once more just how in flux the industry is.

With Canadian marijuana legalization fast approaching, the country is still figuring out how it wants its marijuana market to look.

Province by province, we’re seeing different strategies begin to form, and each one will be pitted against the other as both investors and politicians look to see how successful the marijuana industry can be in Canada.