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Marijuana News Today
Pot stocks rallied after a tough week in the marijuana news today as we receive more information about the popularity of cannabidiol (CBD) in Canada post-legalization.
In Canada, we are seeing more cannabis shortages, this time of CBD oil.
CBD oil, you’ll remember, is one of the more exciting segments of the market because it is purported to have medicinal benefits without inducing a high.
Naturally, that makes it popular among those on a health kick looking to benefit from the restorative qualities of cannabis without wanting to partake of the mood-altering agents.
“The popularity of CBD oil and CBD in general has far exceeded our expectations,” said Ray Gracewood, the chief commercial officer of OrganiGram Holdings Inc (OTCMKTS:OGRMF, CVE:OGI). (Source: “CBD oil shortage continues as marijuana producers scramble to meet demand,” CBC, March 29, 2019.)
“To this point, CBD oil is the biggest surprise from an adult recreational perspective, and has got the potential to be a huge product within that channel.”
Shortages have not been uncommon in the Canadian marijuana market post-legalization. In fact, they were pretty much expected; in most states when legalization became law, there was a marijuana shortage following the initial rushes.
In the case of marijuana, some of the issue lies in how legalization was implemented. Strict packaging and shipping laws made it difficult to meet consumer demand, leading to shortages across the country.
In the case of CBD, the lack of supply stems from a number of issues, from underestimating consumer demand to a lengthy production process.
Another impediment to meeting the needs of consumers is that CBD oil is considered a medicine and companies like OrganiGram have to prioritize medical patients over everyday consumers.
Still, this news bodes well for marijuana stocks.
Consider the most recent quarterly reports for a number of top tier pot stocks. We’ve seen revenue soar by as much as 500% in many quarterly reports of late, motivated by the massive sales increase from Canadian marijuana legalization.
As the market matures, these supply issues will disappear and marijuana stocks will see higher sales—and therefore revenue, which will spur growth.
That’s an excellent place to be in for marijuana stocks, leaving plenty of room to continue to grow sales and revenue in order to show growth quarter after quarter—something investors are almost always particularly keen on.
It’s also worth noting that as marijuana companies expand their CBD oil production capacity, it’ll make it easier to enter the U.S. market, which has effectively legalized CBD.
The passing of the Agriculture Improvement Act of 2018 permits the cultivation of hemp across the United States. CBD can be derived from hemp, making it now a legal substance and one of the more exciting markets in the U.S.
That is to say that there are plenty of opportunities in the CBD market to see growth moving forward, and marijuana stocks are likely to see big gains as the industry matures.
OGRMF Stock
Seeing as how it featured prominently in the marijuana news today, let’s take a look at OrganiGram stock. The stock climbed three percent in early-morning trading while, over the past week, it finds itself down nearly two percent.
The recent drop was primarily caused by an overall weak past few days for pot stocks. But overall, OGRMF stock has been performing very well so far in 2019.
To make things even better, AltaCorp Capital, an investment bank based out of Toronto, came out in support of the marijuana penny stock, saying that it is among the most impressive pot stocks. (Source: “OrganiGram Holdings Inc (CVE:OGI) Pound-For-Pound Financial Performance Remains Unsurpassed,” Midas Letter, March 28, 2019.)
Part of the appeal of OrganiGram is the company’s impressive financials:
OrganiGram’s net sales for the last quarter hit CA$12.4 million, up from CA$2.4 million in the same prior-year period and CA$3.2 million in Q4 2018. That represents a 419% and 287% jump, respectively. (Source: “OrganiGram Reports Record Net Revenue of $12.4 Million Up 287% Sequentially Quarter-over-Quarter; Adjusted Gross Margin of 71%,” OrganiGram Holdings Inc, January 28, 2019.)
Net income similarly grew, hitting CA$29.5 million (CA$0.195 per diluted share). This is in stark contrast to its net loss of CA$1.2 million ($0.012 per diluted share) last year.
These are fantastic numbers and helped motivate a big surge in OrganiGram stock when they were first released a couple months back.
The company continues to impress, with many investors excited for what the future holds. OGRMF stock, after all, is a marijuana penny stock with tons of opportunity for growth.
CRON Stock
One company that has not had an easy time of it this week is Cronos Group Inc (NASDAQ:CRON).
While OrganiGram impressed with its most recent quarterly report, Cronos disappointed this week with numbers coming in under expectations.
Cronos reported revenue of CA$5.6 million, well below the consensus estimate of CA$10.8 million and below all analyst expectations. The company also posted a loss of CA$0.11 per share for fiscal-year 2018.
Analysts surveyed by Bloomberg projected revenue growth for Cronos of more than 500%. As mentioned earlier, that’s not unreasonable given how much other companies have grown of late. (Source: “Cannabis producer Cronos sinks after revenue comes up short (CRON),” Business Insider, March 26, 2019.)
The company’s weak numbers led to a stock price decrease this week of four percent. Cronos stock also fell two percent in early-morning trading today.
While CRON stock is by no means a stinker, this was a disappointing turn of events, especially considering how well the stock had been performing up in 2019 so far.
While the small dip by no means offsets the dozens of points of gains Cronos stock has made year-to-date, it does leave the company vulnerable.
You see, this quarterly report won’t doom the company, but if the next one comes in under expectations, that could really harm CRON stock.
If, however, the company can bounce back in the next earnings report, then expect to see a big gain.
This could also be a blessing in disguise because it may have lowered expectations for the next quarter, leaving the door open for Cronos stock to impress.
OGRMF and CRON Stock Performances
The performances of OGRMF stock (black line) and CRON stock (blue line) over the past week are seen on the chart below.
Chart courtesy of StockCharts.com
Analyst Take
The marijuana news today has us excited for the future of the CBD oil market in Canada and abroad. Meanwhile, we had a mixed bag on the pot stock market.
OGRMF stock continues to impress while CRON stock ends the week on a sour note following its worse-than-expected quarterly report.
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