But as with all investable industries, there will be winners and losers. It’s my opinion that the following three marijuana stocks can be safely left out of your investment portfolio for the time being until they prove their value to Wall Street and investors…
Make no mistake about it, Aurora Cannabis (NASDAQOTH:ACBFF) is one of the most popular marijuana stocks of the group. It’s been extremely active this year, expanding its production capacity via organic build announcements, partnerships, and acquisitions. In fact, it recently completed the biggest deal in cannabis history when it gobbled up Ontario-based MedReleaf for about $2.5 billion.
On one hand, there’s certainly value in being a cannabis kingpin. With all of this added production capacity, Aurora Cannabis has forecast more than 570,000 kilograms of peak annual production. Though output remains fluid, depending on the grower, this could put Aurora Cannabis in pole position in terms of domestic production. Plus, with the company focusing on medical cannabis patients, margins should be notably higher than pot stocks focusing on recreational consumers.
The issue is that Aurora Cannabis has flooded the market with its common stock through multiple bought-deal offerings. Since access to basic banking services wasn’t a thing prior to the passage of the Cannabis Act, the only way to build its weed empire was to issue stock in order to raise capital. Now, with perhaps 1 billion shares outstanding, it’s investors who’ve paid the price.
While investors might see Aurora Cannabis’s $5 share price and perceive a bargain, they have to remember that this still equates to a massive market cap because of its bloated outstanding share count.
Furthermore, the company would need to generate perhaps $200 million in net income just to not scare fundamentally focused investors away at its current share price. It could be a long time before the company reaches those levels. This is a pot stock that can safely be left out of your portfolio for now.
Here’s the thing about investing in the cannabis industry: It’s very easy to like a company’s business model, but absolutely loathe its valuation. That’s the case with posh cannabis dispensary MedMen Enterprises (NASDAQOTH:MMNFF), which became the largest U.S.-based company to list its shares in Canada.
MedMen’s mission is to…
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