Over the past few months, we’ve seen multiple 1,000% gains from several players in the marijuana sector. One of those companies, India Globalization Capital, Inc. (NYSEAMERICAN:IGC), has grabbed headlines ever since it announced that it was looking into the marijuana industry. It most recently revealed that it was going to create CBD-infused drinks, with its “Nitro G” drink being the first to incorporate cannabidiol (CBD) oil, which sent share prices soaring. But investors should be wary of the IGC stock forecast moving forward.
“IGC plans to create a branded, hemp/CBD-infused version of the formulation that addresses market demand for energy drinks with the inclusion of healthy properties derived from hemp including CBD,” the company wrote in a release addressing its Nitro G drink and the plans to have it incorporate CBD oil. (Source: “IGC to Enter the Hemp/CBD-Infused Energy Drink Space,” Business Wire, September 25, 2018.)
The company is using the marijuana drink news to help bolster its stock. It’s working.
This former penny stock climbed from less than $1.00 a share a few short weeks ago to now trade at $13.00. A good chunk of that value was generated via the announced hemp-infused energy drinks labeled under the Nitro G drink line.
The company scored a distribution agreement with Canada, the U.S., South America, and Mexico, further increasing interest in IGC stock. And rightfully so.
IGC stock is operating in a very exciting segment of the marijuana market.
CBD-infused drinks have been causing a stir in the industry for some time now, mainly due to the fact that CBD oil is increasingly being found to have healing qualities while not delivering the psychotropic elements that marijuana is usually known for—the high feeling is due to tetrahydrocannabinol (THC), which is often separated from the CBD in these types of products.
A CBD beverage could even find its way to market in the U.S. much sooner than other cannabis products.
Chart courtesy of StockCharts.com
While the U.S. still labels marijuana in general as a Schedule 1 substance, CBD was recently knocked down to Schedule 5, the lowest possible designation.
This is a huge step forward for CBD products, and investors are justly celebrating that victory and other milestones like it by investing hard in CBD-focused companies.
On top of that excitement, CBD-infused drinks may draw Big Beverage marijuana partnerships.
We’ve already witnessed just how impactful these partnerships can be, as evidenced by the massive investment by Constellation Brands, Inc. (NYSE:STZ) in Canopy Growth Corp (NYSE:CGC), which sent the industry on a tear.
Constellation Brands, of course, was an alcohol producer interested in partnering with Canopy in order to produce these cannabis-infused drinks.
So there are a lot of reasons to like the IGC stock forecast, but I have a few reservations.
IGC Stock Forecast
The main concern over the IGC stock forecast is the company’s size.
This marijuana penny stock has proven that its tiny stature was ripe for it to see massive gains in an extremely short period of time. In fact, the company was up 44% on the day this article was written.
So IGC stock does hold the potential for continuing massive gains.
But investors should exercise caution before going whole hog on IGC.
Firstly, the company is small and only recently got into the space. That has benefited IGC stock, but it means that the foundations and trust in IGC’s ability to deliver long-term gains are simply not there.
Another important point is that IGC stock is benefiting from a lack of options for U.S. investors to get in on the marijuana industry.
While several pot stocks have made the jump to major U.S. listings, none of them has been a marijuana penny stock.
IGC is a U.S.-based marijuana company and a marijuana penny stock, the only one of its kind. It has benefited greatly from that unique position. Expect investor interest to dilute when more companies appear.
Finally, there’s little chance that a Big Beverage marijuana partnership is on the way for IGC stock anytime soon.
The company is simply too small, with a market cap under $500.0 million, to warrant a massive investment from a larger beverage maker.
As it stands, drinks companies of all stripes have been looking at the major players in the industry to partner with; it would be very surprising for one of these massive companies to partner with a pot stock so small.
All this without mentioning the fact that the IGC stock forecast is volatile. You can’t gain 1,000%, after all, without extreme volatility.
That makes investing in the stock a risk, but one that could potentially pay off with massive gains.
The potential is certainly there in the IGC stock forecast.
The question is, as always, what kind of investor you want to be in the marijuana industry.
If you’re looking for a long-term growth stock, then I would steer clear of IGC. There are simply too many question marks surrounding the future of the company to plan around sustained gains for years to come. A good chunk of the progress being made by the stock is being built on hype…for now.
But if you’re looking for big returns quick, then there are few better options than IGC stock. Seeking those returns carries with it inherent risk, but the rewards could be spectacular.