A Canadian cannabis company, Tilray is backed by its largest shareholder, Privateer Holdings, which in turn has backing from billionaire investor Peter Thiel’s fund. Late last year, Tilray became the first Canadian company to export medical marijuana legally to the U.S. for a clinical trial.
Fundamental Analysis
From a fundamental perspective, Tilray is not looking healthy. Its trailing twelve month return on equity (a key profitability metric) is around -70%, operating margins are deep in the red, and its earnings per share growth this year is worse than -800%.
Technical Analysis
The technical picture doesn’t look much better. TLRY stock continues to trend lower since last September’s short-lived spike, and price continues to trade well under its 50-day moving average. Perhaps the only potentially positive aspect of this stock is the fact that it’s now cheaper than it was in August of last year, shortly after its IPO. But that’s not really a great reason to buy a stock. While TLRY is definitely one of the key cannabis stocks to watch, it’s probably not the best time to buy, at least until more positive stock catalysts enter the picture.
Canopy Growth
Canopy Growth Corporation is also a Canadian company, and has the largest market capitalization of any stock on our list at nearly $10 billion (almost a large cap stock). The company has recently been awash in cash thanks to a huge investment from Constellation Brands (STZ), a major international producer of beer, wine and spirits. Canopy owns and operates many different brands, and produces and markets both medical and recreational strains of marijuana.
Fundamental Analysis
Fundamentally, Canopy Growth shows a much more compelling picture than Tilray. Most notably, Canopy’s recent quarterly earnings growth year-over-year is over 4000%. And quarterly revenue growth (YoY) is well over 200%. Return on equity is negative, but not even close to the dismal number from Tilray.
Technical Analysis
These more positive numbers have shown up in CGC’s stock trajectory. While there has been much volatility for the past few years, the stock has been on a general uptrend for quite some time, and has spent most of its history above its key 200-day moving average.
As the world’s largest cannabis company, Canopy Growth has a lot going for it, at least as far as cannabis companies go. This is especially the case after the large cash infusion from Constellation Brands, a giant in the alcoholic beverage industry. The company has also acquired or partnered with diverse companies across the globe that are likely to help fuel Canopy Growth’s expansion ahead of its competitors.
Cronos Group
Late last year, Altria Group (MO), the tobacco giant that makes Marlboro cigarettes, announced its intent to acquire a major stake in Cronos Group (yet another Canadian company). As a result, Cronos’ stock received a big boost. Shortly after that, Altria acquired a major stake in JUUL Labs, a fast-growing e-cigarette maker.
Cronos Group is a Toronto-based producer of medical marijuana. It ships its product internationally and is a leader in the marijuana/cannabis space. The company actively invests in medical marijuana companies, usually based in Canada.
Fundamental Analysis
From a revenue perspective, Cronos’ recent quarterly sales growth (YoY) was nearly +250%. Like the other pot stocks on our list, however, profitability is still significantly negative – return on equity is around -13%.
Technical Analysis
Like Canopy Growth’s chart, Cronos’ price action shows a good deal of volatility with an overall bullish trend for the past couple of years. But since early March, the stock has been correcting pretty sharply, well under its 50-day moving average. Still, CRON remains in a strong uptrend on a longer-term time frame, and some investors may see this as a potential opportunity to buy the (big) dip. Of course, an investor who does so risks attempting to catch a “falling knife“.
Aurora Cannabis
The final Canadian cannabis company on our list is Aurora Cannabis (ACB). It’s the second largest company listed here, after Canopy Growth. Aurora is among the fastest growing companies in this space, fueling its growth primarily through strategic acquisitions.
Notably, Aurora recently announced that it would acquire Farmacias Magistrales SA, Mexico’s first federally licensed importer of raw materials containing THC, the psychoactive ingredient in cannabis. This buyout provides Aurora with the strongest link among all major cannabis companies to Latin America’s booming medical marijuana market.
Fundamental Analysis
Aurora’s recent quarterly revenue growth (YoY) was high, around +360%. And profitability, though also negative like the other cannabis companies, is only mildly negative – return on equity is around -3%.
Technical Analysis
As for the technicals, the price chart of Aurora Cannabis shows a great deal of volatility and no discernible long-term trend. There are big highs in January and October of 2018, interspersed with drops into penny stock territory (under $5 per share). Overall, this stock may appeal to shorter-term traders who like to play the swings.
Long- and medium-term investors may be spooked by the volatility that is inherent in cannabis plays right now and for the foreseeable future. Generally-speaking, fundamentals and technicals both remain weak for many of the stocks in this space. That should be reason enough to just say ‘no’, at least for now.
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