2020 is shaping to be a comeback year for marijuana stocks. We think a new cannabis bull run is coming and we are taking a look at 5 marijuana stocks to own in 2020 and why.
Efforts to legalize marijuana at the federal level are progressing steadily in the US. The US House Judiciary Committee last week passed a landmark bill that seeks to fully legalize marijuana at the federal level. Previously, the House passed a bill to allow federally regulated banks to work with marijuana businesses in states where pot has been legalized. Presently, some 33 states have legalized marijuana in one way or the other.
However, the fact that pot remains illegal at the federal level means that marijuana businesses in the US have been unable to realize their full growth potential. Therefore, the federal legalization of marijuana would widen the market opportunity for marijuana businesses in the US.
Canada, the first developed nation to fully legalize marijuana, has expanded its marijuana market with the legalization of more adult-use marijuana products, whose sales begin in December. Marijuana sales in the regulated market in Canada are still significantly dwarfed by black-market sales.
The factors holding back Canada’s regulated marijuana market range from a shortage of shops where people can purchase pot products to higher prices in the regulated pot market. However, the shortage of marijuana shops is expected to ease soon or later as the government wants to have 75 shops operating in Ontario eventually. Only 24 marijuana shops have opened in Ontario, a province of more than 14 million residents since full marijuana legalization in Canada a year ago. Canada’s marijuana companies are also starting to squeeze the black market with the introduction of competitively priced products. Experts have pointed out that Canada’s adult-use marijuana market is on track to double next year with the recent legalization of new adult-use marijuana products.
Here are 5 marijuana stocks to own in 2020 because of their long-term opportunity.
Aurora Cannabis Inc (NYSE:ACB): A great marijuana stock available at ground floor price
Based in Canada, Aurora is one of the world’s largest and well-known marijuana companies. Though based in Alberta, Canada, Aurora has a global footprint. It operates 15 global production facilities across 25 countries. Aurora is a vertically integrated and horizontally diversified marijuana business, whose operations touch on every key segment of the marijuana value chain. Here are four reasons you may want to own Aurora stock in 2020:
- Aurora defies headwinds in fiscal 2019 and how ready to capitalize on Canada’s expanded marijuana market
Aurora has adequately prepared to take full advantage of the expanded marijuana market in Canada. The company has developed a broad range of high-margin products, ranging from vape devices to edibles, that it intends to bring to consumers in Canada’s expanded recreational marijuana market.
Even as marijuana businesses in Canada struggled with shop shortages and a black market that continues to thrive a year after full marijuana legalization in the country, Aurora was able to pull triple-digit revenue growth of about 350% in its fiscal 2019 ended June. The expanded marijuana market provides an opportunity for Aurora to drive even greater revenue growth.
- Aurora strengthens executive team
Aurora recently created new senior executive roles: Chief Product Officer and Chief Integration Officer. The company has promoted two of its top-performing executives to lead these newly created executive roles. Aurora decided to expand its executive team as part of a strategy to maximize its opportunities in the marijuana industry, both in the expanded Canadian market and internationally.
- Aurora curbs spending to preserve cash and strengthen balance sheet
Aurora has stopped further development of certain of its facilities as part of an effort to expand responsibly. Putting those developments on hold will save Aurora about C$200 million in costs. And that should ensure that Aurora remains well-capitalized to run its operations and jump on new attractive opportunities as they rise.
- Aurora spots an attractive valuation
The broad selloff in marijuana stocks has brought Aurora down to its 2-years lows. But looking at how Aurora has positioned itself for long-term growth as well as the expanding domestic and international marijuana markets, Aurora’s current valuation clearly doesn’t reflect the company’s potential.
Aphria Inc (NYSE:APHA) spots attractive valuation and strong fundamentals
Aphria is a Canadian marijuana company with an international footprint. Here are four reasons you may want to own Aphria stock in 2020.
- Aphria continues strong revenue growth, and one top of that it is one of the few profitable marijuana companies
Aphria is currently in its fiscal 2020. The company released its fiscal first quarter in October. It reported revenue growth of 849% year-over-year to C$126.1 million. Net profit for the quarter came at C$16.4 million. The company is aiming for fiscal 2020 revenue between C$650 million and C$700 million, which the management said is now more within reach after solid first-quarter results.
- Aphria ready to capitalize on expanding marijuana market
Aphria recently doubled its production capacity, which positions it well to take full advantage of the recently expanded marijuana market in its domestic market Canada. Aphria has not only added more capacity but also implementing operation automation that should allow it to cut costs and in turn boost its profitability.
- Aphria partners with PAX Labs to enter vape pens market
To capitalize on Canada’s recently expanded adult-use marijuana market, Aphria is introducing new products. The company has partnered with PAX Labs to enter the vape pens market, a potentially lucrative marijuana-derivative product segment in Canada. As a result of the partnership, Aphria will be able to sell PAX Labs’ PAX Era vape pen brand in Canada when sales for such products open.
- Aphria going for a steep discount
The selloff in marijuana stocks this year has brought Aphria to its 2-years lows and nearly 70% off its all-time peak. But looking at how Aphria looks well-positioned for a powerful recovery, the current low price is an opportunity to grab the stock at a steep discount.
Canopy Growth Corp (NYSE:CGC): Discount valuation and extensive international presence
Canopy, one of the largest and well-known marijuana companies in the world, is headquartered in Canada. Its marijuana business serves both medical and adult-use or recreational markets. Canopy operates multiple marijuana brands, thereby catering to a broad range of consumer demands. There are several reasons you may want to buy Canopy stock heading into 2020.
- Canopy boasts a more development international footprint that many if not all of its industry peers. That positions Canopy well for robust growth in the future considering efforts in countries like Mexico to fully legalize marijuana.
- Canopy is about to enter the lucrative US market for CBD products. The company is also introducing new products to take advantage of Canada’s recently expanded recreational marijuana market. Moreover, Canopy boasts ample cash reserve to continue investing in its development and be financially flexible to jump on new opportunities as they arise.
- Canopy’s current low valuation, a result of the broad selloff in marijuana stocks in recent months, further makes it a great marijuana stock pick going into 2020.
- Canopy has a market cap of just $7 billion and cash on hand of $2 billion.
Cronos Group Inc (NASDAQ:CRON): US expansion positions company well for future growth
Cronos is a Canada-based marijuana company with an international footprint. It runs a diversified marijuana operation that serves both medical and adult-use markets. Cronos looks attractive marijuana investment heading into 2020.
- Recent selloff makes Cronos an attractive pot pick
Firstly, the recent selloff in cannabis stocks has made Cronos one of the cheapest pot stocks currently.
- Cronos expanding into the US market
Secondly, the company’s continuing growth and bright long-term prospects make it even more attractive. Cronos grew its revenue by nearly 240% year-over-year in the third quarter. Cronos recently completed the acquisition of several operating subsidiaries of Redwood Holding Group. With that transaction, Cronos has expanded its reach in the US, the largest marijuana market in the world that could grow even bigger with federal legalization of pot.
- Cronos adding capacity to be ready to fill the demand
Moreover, Cronos has been expanding its manufacturing capacity to better position itself to meet the demand for marijuana products in both domestic and international markets.
Village Farms International Inc (NASDAQ:VFF): a promising marijuana stock at a great bargain thanks to the recent selloff
Village Farms International is a marijuana grower with operations in both Canada and the US. Though VFF isn’t one of the top marijuana companies that frequently make headlines, you cannot it is one of the most attractive pot stocks right now for investors who may want to profit from the ongoing marijuana legalization.
- Selloff makes VFF a big discount opportunity
Village Farms spots an attractive valuation after the recent big selloff in the marijuana sector, which makes it a great discount opportunity for investors looking to profit from marijuana legalization in the US and Canada, and the expected legalization in countries like Mexico.
- Village Farms joint venture Pure Sunfarms doing well
Village Farms’ legacy business is growing vegetables, but the business is struggling as the company’s latest financial results show. However, Village Farms was clever enough to seize the opportunity in the marijuana market so the company’s fate is no longer tied to its struggling vegetable business. Village Farms entered marijuana and hemp markets through a joint venture called Pure Sunfarms, which it co-owns with Emerald Health Therapeutics. Pure Sunfarms did so well in the third quarter, becoming the top performing marijuana brand in Canada’s Ontario province.
- Village Farms on track to own a bigger piece of Pure Sunfarms
Village Farms currently owns a 50% stake in Pure Sunfarms, but that stake could rise after Emerald Health recently defaulted in an agreement.
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Disclosure: We have no position in any of the stocks mentioned and have not been compensated for this article.
Forget APHA and ACB, Buy GTBIF and TCNNF
There are a lot of misconceptions going on when it comes to US legalization. Many investors are buying Aphria (APHA) and Aurora Cannabis (ACB) hoping to bank on what’s happening in the US. However, they are Canadian Licensed Producers and have no business in the US. Investors are buying them because they trade on the major exchanges, but that is the wrong move. The correct move is to buy the US multi-state operators like Green Thumb Industries (GTBIF) and Trulieve Cannabis (TCNNF).
On Election Day voters in New Jersey, Arizona, Montana and South Dakota voted to legalize recreational marijuana. South Dakota and Mississippi voters also approved measures to legalize medical marijuana.
There’s also the prospect of a more pot-friendly White House with President-elect Joe Biden. Vice Presidential Candidate Kamala Harris said at the debate a Biden administration would decriminalize marijuana at a federal level and expunge criminal records of people with marijuana-related offenses.
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The company also owns and operates rapidly growing national retail cannabis stores called Rise™ and Essence. Headquartered in Chicago, Illinois, Green Thumb has 13 manufacturing facilities, licenses for 96…
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