The Cannabis shares have a windy start in 2019. The sector turned out to have peaked in the autumn of 2018. As many had warned, the marijuana shares were sharply lowered after Canada's legalization came into force in a classic "selling news" event. Since then, the tide has turned. This year, the pot warehouses are back with the ETF sector which sends a 50% flow of ladders.
Not surprisingly, this enthusiasm has borne both recreational and medical cannabis stocks. For today, let's focus on the medical room. The recreation games have received more attention lately with all the splitting partnerships. However, there are some interesting business stories that evolve in the medical cannabis store.
Aurora Cannabis (ACB)
Aurora Cannabis (NYSE: ACB ) gets a lot of attention this week thanks to the latest earnings report. Aurora initially disappointed the market as the income figures came below expectations. This point increased confusion. The company reported CAD 48 million in cannabis revenue, which was below expectations. Total income, including some other minor accounting items, hit CAD 54 million. That figure hit the analysts' view.
The ACB share originally fell by 5% after earnings. Since then, the course reversed and traded higher. It's reasonable; At the end of the day, there are prospects that matter here, not a few million dollars of revenue this past quarter. On that note, the most solid bullish argument for the ACB share is that its patient base is rising. This quarter reported more than 73,000 active registered patients – more than 200% growth from the same quarter last year.
Of course, Bjørn will point to the enormous losses that Aurora reports. The company lost CAD $ 238 million, which blows the revenue of CAD 54 million out of the water. Some of these losses are related to ramping up operations. Aurora is projecting positive EBITDA during the half-year, and much less net income loss. That, combined with the relatively insignificant mood here, makes ACB make a purchase within its sector. Be careful, however, Aurora has to start posting much less losses as its customer base increases, or investors will lose patience quite quickly.
GW Pharmaceuticals (GWPH)
In the case of medical cannabis containers – unlike the recreational pathway – GW Pharmaceuticals (NASDAQ: GWPH ) is the King. GW Pharmaceuticals became involved in the epilepsy drug before the flood of marijuana shares hit the market last year.
GW capitalized on its first-time advantage by already securing FDA approval for its therapy while other cannabis containers still get their business up and running. The company has received widespread insurance coverage for the drug Epidiolex.
Earlier, GW confirmed that the vast majority of both service fee and managed Medicaid providers will cover Epidiolex. Large private vendors, such as Express Scripts (NASDAQ: ESRX ) are on board as well. GW recently increased $ 300 million. That cash should give it plenty of runway to get Epidolex sales up and running, while funding its many other clinical trials. For a pureplay marijuana biotechnology stock, it is difficult to top GWPH.
Cara Therapeutics (CARA) Cara Therapeutics (NASDAQ: CARA ) is a little more subservient to a cannabis stock. The company specializes in various therapeutic treatment options that can serve as alternatives to opioids. As we have seen in recent months, opioids are a crisis in America. An estimated 30,000 people die from overdoses every year.
This opens an opportunity for Cara, which I previously described. As it is, Cara has various drug therapies in development for pain management. Some of these involve cannabinoids, although the main clinical candidate does not. In any case, with China increasingly in the news, the CARA stock should shine as doctors look for alternatives to dangerous traditional opioids. The CARA stock is up from $ 12 to $ 17 recently, and can increase much further when picking up more backers from the medical marijuana stock community.
KushCo Holdings KSHB
KushCo Holdings (OTCMKTS: KSHB ) is without doubt the clearest medical marijuana distribution game in the US at this time. The company used to be called Kush Bottles, which shows the company's main product line. However, KushCo has branched past just packaging to provide a variety of supplies for medical marijuana sales. By working with more than 5,000 pharmacies and dispensaries worldwide, KushCo has established a powerful first mover advantage in its field.
It is said that there are reasons for caution with the KSHB share. You may think this is a cheap store. It is for less than $ 6 and is not listed on a large stock exchange. Despite these factors, KushCo has a market capitalization of over $ 500 million, as the company has issued many shares to fund the growth.
As appealing as "picks and spades" play in the marijuana industry, KSHB stocks come with risks. The $ 500 million market price is supported by just $ 50 million in current assets, giving a 10x valuation more on the property, inventory, cash, and so on. Also, you should notice the company's gross margin. The gross margin has declined from 35% to 13% in recent quarters, which resulted in KushCo increasing ever more losses despite increased revenues. KushCo has an interesting business model and a strong advantage from its robust distribution partnerships.
Pyxus International (PYX)
What happens when a worn old tobacco company is more than a hundred years old? makes itself a marijuana game? The stock fluctuates. Meet the company formerly called Alliance One, now known as Pyxus International (NYSE: PYX ). During the last two decades, Alliance One has turned flat to falling revenues as the tobacco business declined. So last summer, using the hemp solution to avoid legal problems, Pyxus swung to the marijuana market and changed its name, and the PYX share flew.
In fact, the PYX share increased from $ 13 at the beginning of 2018 to as high as $ 40, backed by favorable talks from the same Citron Research among others. But the enthusiasm would not last long. When investors came to their senses, they saw that Pyxus remained heavily in debt and stuck to its ancient tobacco business that faces uncertain prospects in the future. There are many cannabis populations out there; Not many people have more than one billion in debt that Pyxus does.
The PYX share increased more than 30% on Tuesday after the income report. The market clearly liked what it saw, with revenue growth of almost 10%. But the company continues to lose large amounts of money. It reported an EPSAP loss of 56 cents per share. It will need a much larger setback to justify something close to its current share price. The recent share price gives speculators an ideal opportunity to sell PYX shares.
GB Sciences (GBLX)
GB Sciences (OTCMKTS: GBLX ) is – way alike – to KushCo. Despite trading on Pink Sheets and having a small share price, the GBLX share is not necessarily undervalued. The GBLX share actually sells in one quarter, but due to a large stake it has a market value of nearly $ 60 million.
I don't particularly want to choose GBLX stock, as there is a bunch of medical cannabis containers like GBLX. But it is worth noting one such as seeing the pattern. You find a bunch of these, the companies that are related to what the current trend is popular, but do not have many own resources.
In the case of GB Sciences, they only had $ 3 million in cash after their last quarterly report. It's not a good sign, as the company has $ 2.1 million in short-term debt and more than $ 8 million in total liabilities. It will make it difficult for the company to achieve its goals in studying Parkinson's and other serious diseases. Yes, GB will post more press releases and get more media attention, but without much more money, the stock will not go anywhere in the long run. The GBLX share plummeted from a high of 80 cents to just 14 cents last year. If you are already a long time, take advantage of the latest rebounds to get out at 24 cents – GBLX is likely to go much lower in the coming months.
Lexaria Bioscience (LXRP)
] Lexaria Bioscience (OTCMKTS: LXRP ), like GB Science, is a penny stock on Pink Sheets exchange . However, the LXRP has much more credibility and gives us a good example of the contrast between an investable speculation and a risky gamble. Lexaria is a higher quality medical cannabis stock because it has a strong baker: Altria (NYSE: MO ).
Altria Famous Promise Cronos (NASDAQ: CRON ) in the big leagues with its huge $ 12 / share investment. CRON stock went on to beat $ 25. Altria got much less attention with its recent investment in Lexaria, but it may end up having a similar effect. Earlier this year, Altria agreed to invest up to $ 12 million in Lexaria.
Why did it do that? Lexaria has a new patented technique for oral delivery of medicines. Obviously, this potentially has a large market in the medical marijuana area. As it is, Altria has validated the technology by investing in it and is seeking to commercialize it for nicotine. At $ 1.30 per share and a market value of $ 100 million, the LXRP share is still very speculative. But unlike many medical cannabis stocks, Lexaria has promising technology and enough financial support to potentially deliver strong results to its investors.
At the time of this letter, Ian Bezek owned MO stock. You can reach him on Twitter at @irbezek.