Higher Times? A Marijuana Stocks Outlook

The market theme of the last few weeks has been one of striking volatility. Across global and domestic stock markets, yes; but, most acutely felt among shareholders of cannabis stocks.

So, let’s take a moment to check in with the standings of several industry leaders. (Also, review the latest stats at Top News for Marijuana Stocks for Early February).

Marijuana stocks values in Aphria Inc. (TSX:APH) saw record highs no more than four weeks ago in January and, yet, are currently down 34%.

Since mid January, the company has taken steps to limit its exposure to an uncertain U.S. market – where cannabis remains federally illegal and faces government opposition – by partially divesting a stake in Liberty Health Sciences.

Then, there was the acquisition of Nuuvera, which Aphria purchased for $836 million in cash and stocks. The deal struck allowed them to purchase Nuuvera stocks for $8.50 per share, but, those shares have since traded at $6.25 each – in hindsight, a consolidation that likely occurred at the market’s high.

Aurora Cannabis, Inc. (TSX:ACB) company’s pot stocks also reached highs in January that have fallen 27% in the weeks following.

The highs occurred during a month when Aurora acquired a one-fifth stake in Liquor Stores N.A. Ltd.(TSX:LIQ) and reported a 42% increase in revenues for the second-quarter fiscal year, but, have been down since. Some wonder if this trend is evidence of overly high expectations for market growth being baked into the price of company stocks industry-wide, leaving companies and marijuana stocks no place to go but down.

Aurora’s decision to pay double the initial offer price for CanniMed Therapeutics (TSX:CMED), from $24 per share to $44 per share, leaves the company looking impatient, overcompensating and lacking the discipline needed to sustain long-term growth. The deal was finalized with relative amicability after months of hostile exchanges between the two companies. Though it represents Canada’s biggest acquisition in the cannabis stocks industry, the coming months will require flawless execution to determine whether the deal was worth the cost. Unfortunately, shareholders will be the likely ones to suffer as Aurora pays CanniMed’s inflated offer in the dispersal of common shares and cash.

Canopy Growth (TSX:WEED) pot stocks share values have dropped 37% since mid-January.

This long time industry leader is operating in negative cash flow and earnings, in a regulatory environment that remains uncertain, which some investors may view as too risky.

Karen Thomas, a Motley Fool contributor, offered this assessment:

“Think back to the dot-com bubble. There was no shortage of banks and brokerages scrambling to raise money for all sorts of dot-com companies, as they wanted to get in on the action and profit from the big bucks that were being made. That didn’t mean that these companies were good investments. And it didn’t stop the meltdown. It probably foretold it.”

As cannabis stock investors, it is beneficial to take in several perspectives when analyzing the risks and potential payoffs of investing in specific marijuana stocks companies. (For another perspective, read Can Marijuana Stocks Still be a Solid Investment in this Market?)