3 Cannabis Stocks to Avoid in July

The cannabis revolution is gaining traction in the United States as the legalization of recreational and medical cannabis picks up steam at a dramatic pace. So far, 18 states and Washington, DC, have legalized the use and cultivation of recreational cannabis. So, approximately 44% of the U.S. population now lives in a state where recreational use of marijuana is legal, or soon will be…

However, pot legalization at the federal level still faces a roadblock. Despite the fact that the MORE Act, which was reintroduced last month by House Judiciary Committee Chairman Jerry Nadler, to decriminalize cannabis at the federal level is likely to be passed by the Democratically controlled House of Representatives, the Senate’s decision position remains uncertain. And since the chamber’s disagreement could stall the federal legalization process further, the cannabis industry is expected to witness significant stock market volatility in the coming months.

Given the uncertainty surrounding  federal legalization of cannabis, we think it’s best to avoid cannabis companies that don’t possess good financial health. To that end, we believe HEXO Corp. (HEXO – Get Rating), 22nd Century Group Inc. (XXII – Get Rating), and Akerna Corp. (KERN – Get Rating) are best avoided now.

Click here to check out our Cannabis Industry Report for 2021

HEXO Corp. (HEXO – Get Rating)

Canada-based HEXO is a producer, and seller of adult-use and medical cannabis products under the brand name HEXO. The company has a production capacity of roughly 300,000 square feet. In addition,  the company sells dried cannabis under the Time of Day and H2 lines brand names.

This month, HEXO announced the completion of a deal to buy its first U.S. manufacturing site in Fort Collins, Colorado, through a fully owned subsidiary in the United States. This transaction could  help HEXO to extend its reach in the United States, but it will negatively impact its cash balance for the time being.

HEXO reported a C$16.09 million ($13.06 million)operating loss in the fiscal third quarter, ended April 30, 2021. The company also reported a C$20.71 million ($16.81 million) net loss, representing a 6.1% increase year-over-year. Also, its  adjusted EBITDA came in at negative C$10.78 million ($8.75 million) over this period. The stock has declined 18.8% over the past month and 8% over the past three months.

HEXO’s POWR Ratings are consistent with this bleak outlook. The stock has an overall F rating, which translates to Strong Sell in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its weighting.

The stock is also rated an F grade in Stability, Value, and Sentiment. Within the F-rated Medical – Pharmaceuticals industry, it is ranked #224 of 225 stocks.

To see the additional POWR Ratings for Growth, Momentum, and Quality for HEXO, Click here.

22nd Century Group Inc. (XXII – Get Rating)

XXII is a Clarence, N.Y.-based biotechnology company that  produces plant-based solutions for the life science, consumer goods, and pharmaceutical industries. The company is also working in collaboration with Keygene N.V. to create hemp/cannabis plants with superior cannabinoid profiles and other agronomic qualities for medicinal, therapeutic, and agricultural uses.

This month, XXII closed its sale of 10 million shares of stock, raising  gross proceeds of $40 million. Although this equity financing could  help the company to procure additional intellectual property rights and fund its research and development expenses, it could…

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