Canada’s legalization of marijuana for recreational occurs October 17, 2018. That should boost marijuana production and sales—and the appeal of marijuana stocks for investors. However, even for aggressive investors, it’s important to understand the risks of investing in marijuana stocks.
The speculative appeal of Canadian marijuana stocks continues to attract investors looking for a “ground-floor opportunity.” However, the pioneers in an industry are not always the ones who survive.
There are also low barriers to entry for new competitors—and those barriers just got lower with the announcement by the federal government that it will let large cannabis producers start growing crops outdoors. That introduces a new, cheaper supply of marijuana that will compete with established indoor producers who have invested billions in greenhouses and other indoor facilities.
The government feels the new source of supply will help suppress the illegal black market for cannabis. Established indoor producers lobbied against outdoor growing, citing the risk of theft, contamination from pesticides from adjacent fields and the pungent smell of cannabis plants during flowering.
Longer term, if demand grows large and profitable enough, major agricultural and drug companies, as well as tobacco firms, are likely to enter the field and take sales away from existing growers.
Shares of many marijuana stocks may move higher as momentum traders buy the widely followed stocks on the latest upswing. However considering their current sales, many Canadian producers have very high “market caps” (the value of all shares outstanding). That means they need huge revenue growth even to justify their current stock prices. If revenues merely hold steady or rise only slowly, their stock prices will be vulnerable.
Note, too, that strong investor interest in any new area also attracts penny stock spammers—and marijuana stocks are no exception. The upcoming market boom following legalization could bring about a new wave of these penny promotions.
Our special report gives you analysis of Canada’s leading marijuana stocks today—as well as ways to profit from the marijuana boom that are very different from what many investors are thinking. Read our special free report, The Highs and Lows of Marijuana Stocks.
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Marijuana Producer
The company aims to participate in the growth of what it sees as the best early-stage licensed marijuana producers, cannabis oil extractors and retail networks. However, venture capital is always a highly… Read More
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News on cannabis stocks and on developments in the industry haven’t let up in today’s volatile markets. Here are the stories that we believe will mean most to you as a Canadian investor.
1. Aurora Cannabis led the industry this week in releasing… Read More
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Cannabis-Connected
While some of Canada’s banks were initially reluctant to participate in cannabis company financing, this institution has actively helped to facilitate large industry deals. At the same time, a key U.S. acquisition lets the bank benefit from the strong U.S. economy. In… Read More
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Investment Outlook
Government regulation is a significant risk factor for industry firms. That makes pushing into new markets with differing regulations attractive. But expanding to new regions through acquisition carries its own risks for cannabis companies.
FREE REPORT
As developments come thick and fast with… Read More
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Marijuana Producer
This established cannabis producer should continue to benefit from a supply contract with the Quebec Government and similar deals in B.C., Ontario and Greece. An edibles joint venture with a leading alcohol… Read More
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Marijuana Producer
This Canadian producer of high-quality pharmaceutical-grade cannabis is using international joint ventures to expand its operations. Still, its debt is low and it holds a strong cash position.
SPECIAL MESSAGE
To see where the… Read More
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Investment Outlook
Cannabis growers seeking to expand their operations have been quick to turn to acquisitions. However, in any takeover transaction, the seller always knows more than the buyer. That carries risk for industry producers using a growth-by-acquisition strategy, especially in a business… Read More
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Cannabis-Connected
This Canadian coffee chain with 270 locations has formed an alliance with an operator of medical cannabis clinics. The deal could see the company tap consumer demand for edibles when the federal government legalizes that profitable segment of the market in the… Read More
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News on cannabis stocks and on developments in the industry haven’t let up in today’s volatile markets. Here are the stories that we believe will mean most to you as a Canadian investor.
1. Health Canada has now suspended the sales licence of a… Read More
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News on cannabis stocks and on developments in the industry haven’t let up in today’s volatile markets. Here are the stories that we believe will mean most to you as a Canadian investor.
1. Private sellers in Canada’s fledgling cannabis industry continue to… Read More
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Marijuana Producer
This major producer of medical marijuana continues to expand its operations following the legalization of recreational cannabis.
While its market share already places it among the biggest producers, a key deal with… Read More
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Cannabis-Connected
This company is set to add to its steadily increasing profits with special equipment to help cannabis producers maximize their yields.
The industry is struggling to boost its output to meet high demand, so this firm’s focus on improving its equipment—it raised its… Read More
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Investment Outlook
You should be quicker to sell aggressive stocks—and cannabis producers certainly fall into that category—than conservative ones. Consider our sell-half rule.
FREE REPORT
As developments come thick and fast with marijuana stocks, reliable research and recommendations are more important than ever.
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Cannabis-Industry Company
This U.S.-based company saw its revenue jump nearly 200% in the latest quarter—largely fuelled by the spreading legalization of medical and recreational pot across the U.S. The company’s move into selling the… Read More
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Investment Outlook
For marijuana producers with high share prices, there may be a downside to making a profit if investors react negatively to their high price/earnings ratios.
FREE REPORT
As developments come thick and fast with marijuana stocks, reliable research and recommendations are more important… Read More
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Cannabis Related
This alcohol giant is increasingly focused on premium brands and saw its core business increase both its revenue and earnings in the latest quarter. Still, it’s expecting its $5 billion investment in a leading cannabis company to further lift its profit… Read More
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News on cannabis stocks and on developments in the industry haven’t let up in today’s volatile markets. Here are the stories that we believe will mean most to you as a Canadian investor.
1. Canada’s leading producers continue their buying spree, with Tilray… Read More
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News on cannabis stocks and on developments in the industry haven’t let up in today’s volatile markets. Here are the stories that we believe will mean most to you as a Canadian investor.
1. Canopy Growth Corp. is making a federally-sanctioned move into… Read More
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Investment Outlook
Cannabis investors have several “reasons for wariness.” The outsized market caps of many of the industry’s leading stocks is one of them.
FREE REPORT
As developments come thick and fast with marijuana stocks, reliable research and recommendations are more important than ever.
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Marijuana Producer
The Flowr Corporation aims to position itself as a producer of the highest quality medical and recreational cannabis, thanks in part to joint research and development efforts with Scotts Miracle-Gro. It has… Read More
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