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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Besides, cigarettes and cigars, this company also sells smokeless products and wine. Earlier this year, it made a big investment in a Canadian cannabis producer to further broaden that product line plus offset slowing tobacco growth.
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This ETF holds primarily Canadian cannabis and related companies with additional exposure to the American and U.K. markets. Surprisingly, it offers a cash dividend—but not in the way you’d think.
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Sales to U.S. and Canadian cannabis producers now account for 17% of revenue for this maker of lawn and garden products. This should keep rising as a growing number of U.S. states legalize cannabis. The company’s overall sales rose 17.7% in the… Read More
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This cannabis retailer continues to add assets by acquisition as it secures additional licenses. It now operates in 18 states and territories. It’s likely that the movement towards legalizing cannabis will continue… Read More
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This medical cannabis seller thinks that better verifying and tracking the sources of the marijuana it sells will convince more doctors and patients to consider buying its cannabis-based treatments instead of regular drugs.
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Not all geographic expansion works as planned, but it’s an attractive strategy for marijuana firms aiming to accelerate their growth and diversify both domestically and internationally.
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Canadian and international investments of this venture capital firm include licensed marijuana producers, cannabis oil extractors and retail networks. It aims to identify the best early-stage companies with the greatest potential—but that’s… Read More
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This pharmacy operator hopes to spur its flagging earnings with CBD (cannabidiol) products as more states legalize cannabis. The stock trades at just 9.1 times the forecast earnings despite the sales potential of CBD and the company’s cost-cutting program.
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A recent acquisition gives this marijuana seller a licensed presence in 12 U.S. states through 85 retail stores, 17 cultivation facilities, and 15 production facilities. The company has a 7% share of… Read More
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Many Canadian cannabis producers have signed e-commerce deals with this firm to get real-time snapshots of their entire business, including inventory, shipping and payments across multiple sales channels.
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This Canadian cannabis grower aims to take its premium strains of marijuana worldwide. It’s also investing $14 million in a facility to research cannabis plant genetics and develop disease-resistant varieties.
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