Marijuana Stocks: Are Canadian Pot Stocks Good Buys After Tilray Gives Sector A Break?


The descent for Canadian marijuana stocks continued last year, as expectations dimmed for cannabis reform in the U.S. But Tilray (TLRY) recently gave the sector a brief boost after a mixed earnings report. So are any Canadian marijuana stocks buys now?




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Tilray stock jumped nearly 14% on Monday, and other marijuana stocks followed, after the company broke even on a per-share basis, but reported sales that missed expectations. Non-operating income got a boost after the company recognized a change in the value in convertible debt and warrants, following a decline in its stock price.

But the sector later gave up some of those gains. And competition has grown more intense in Canada, weighing on sales for all of the nation’s publicly-traded licensed producers.

The industry has burned through too much money, grown too much weed and overestimated growth in newly-legal nations abroad. Some marijuana stocks analysts have said Canadian producers have misunderstood what customers want. Were the U.S. to fully legalize marijuana, entry into the nation wouldn’t be easy or even guaranteed for the Canadians.

Below, we take a look at some of the marijuana stocks trading on the major U.S. exchanges.

 

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IBD and Marijuana Stocks

IBD only has full ratings for marijuana stocks in Canada that trade on the big U.S. exchanges. But it also tracks stocks related to the marijuana industry, like Innovative Industrial Properties (IIPR), a U.S. cannabis-focused real-estate investment trust.

MarketSmith also has limited ratings data for some U.S.-based cannabis producers that operate in legal states, like Curaleaf (CURLF), Green Thumb Industries (GTBIF) and Trulieve (TCNNF). Those marijuana stocks trade over the counter and in Canada.

Cronos Stock Chart

Cronos Group stock has a 22 Composite Rating and an EPS Rating of 39. Ratings for other marijuana stocks are also weak.

Cronos’ Canadian market share remains small, compared to the likes of Tilray (TLRY), Canopy Growth (CGC) and other Canadian names that trade on U.S. exchanges.

The company recently also said it received a Nasdaq-listing delinquency letter, after falling behind on filing financial information.

Hexo Stock Chart

Hexo (HEXO) stock has a weak 5 Composite Rating. Its EPS Rating is 12.

From October to December, Hexo had the largest Canadian retail market share of any of the nation’s marijuana stocks, according to Stifel. That share stood at 10.9%, trailed by Tilray, Auxly and Canopy. Hexo, Tilray and Canopy have all lost market share in recent months.

Hexo also recently reported a bigger first-quarter loss than expected and sales that missed expectations. The company also announced a plan intended to shrink or restructure its large debt load, look for a new CFO as its current one departs, cut production costs, focus on “more disciplined” pricing and align cultivation with demand.

Canopy Growth Stock Chart

Canopy’s market value stands at $3.5 billion, according to Marketsmith.

Canopy’s most recent quarterly results disappointed investors — continuing a trend of underwhelming financials for the company. Canopy pushed back its profitability targets, blaming competition in Canada for more potent strains and a slow distribution rollout in the U.S. The company has also shaken up its executive team.

Canopy has a CBD business in the U.S. It has deals in place to eventually buy U.S. cannabis operator Acreage Holdings and Wana Brands, an edibles maker in the U.S.

Canopy Growth stock has a 15 Composite Rating and a 54 EPS Rating.

Tilray Stock Chart

Tilray (TLRY) has merged with Aphria. The company also owns a hemp-granola maker, a craft brewer and a distiller — with hopes of selling THC cannabis products through at least some of those companies when federal legalization happens in the U.S. It also has a deal to eventually hand it a stake in struggling cannabis retailer MedMen.

Some marijuana stocks analysts have questioned that approach. The stock has a Composite Rating of 20 and an EPS Rating of 52.

Aurora Cannabis Stock Chart

Aurora Cannabis (ACB) recently said it would close one of its facilities, laying off around 8% of its workforce in the process.

In November, the company lost less per share than expected. But sales missed expectations.

The stock has a 20 Composite Rating and a 51 EPS Rating.

Innovative Industrial Properties Stock Chart

Innovative Industrial Properties buys properties from pot growers and then leases them back.

The company in November reported quarterly revenue that beat expectations. But funds from operations came up short. Shares have an 85 Composite Rating. Their EPS Rating is 97.

Marijuana Industry ETFs

Amid the volatility in marijuana stocks, one way to avoid stock-specific risk is via ETFs. The ETFMG Alternative Harvest (MJ) ETF is one such option. The AdvisorShares Pure Cannabis (YOLO) ETF and the Cambria Cannabis ETF (TOKE) are others.

Another ETF, AdvisorShares Pure US Cannabis ETF (MSOS), offers investors exposure to U.S. multistate operators, which analysts say are on a sturdier path to profitability.

Are Marijuana Stocks Buys Right Now?

So are any marijuana stocks a good buy right now? Based on IBD’s analysis, no.

Investors eager to jump into the sector could buy those stocks when they form bases and move into buy zones.

But overall, IBD’s research shows that investors would be better served looking for stocks with stronger overall ratings that are closer to their highs.

Check out IBD Stock Lists and other IBD content to find dozens of the best stocks to buy or watch.

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