Thanks to increased legalization and rising demand, U.S. cannabis sales hit a record high $24 billion last year and are expected to reach $70 billion by 2028. The United States is expected to see legal sales of…
$30 billion in 2022 as cannabis companies prioritize risk management.
A growing demand for cannabis oil for therapeutic purposes from an aging population, and increasing consumer demand for innovative recreational cannabis products, should drive the industry’s growth.
However, not all cannabis companies are expected to benefit from the industry tailwinds. Canopy Growth Corporation (CGC – Get Rating), Cresco Labs Inc. (CRLBF – Get Rating), Aurora Cannabis Inc. (ACB – Get Rating), and Sundial Growers Inc. (SNDL – Get Rating) are currently trading at price levels that are inconsistent with their poor fundamentals. So, we think these overvalued stocks are best avoided now.
Canopy Growth Corporation (CGC – Get Rating)
Headquartered in Smiths Falls, Canada, CGC is a diversified cannabis company that operates through Global Cannabis and Other Consumer Products. The company, through its subsidiaries, produces and sells legal marijuana in the medical and recreational market. Its products include dried cannabis flowers, oils, concentrates, and soft gel capsules.
During its fiscal second quarter, ended Sept. 30, 2021, CGC’s net revenue decreased 2.9% year-over-year to CAD131.37 million ($104.19 million). The company’s total operating expenses came in at CAD144.22 million ($114.38 million). Also, its operating loss amounted to CAD215.36 million ($170.8 million), and the company’s net loss was CAD16.33 million ($12.95 million) during the period.
CGC’s EPS is expected to decrease 318.5% in its fiscal year. 2022. Also, its stock has declined 74.5% in price over the past nine months and 81.9% over the past year.
In terms of forward EV/Sales, CGC is currently trading at 5.91x, which is 24.4% higher than the 4.75X industry average. In addition, in terms of forward Price/Sales, CGC is currently trading at 6.40x, which is 17.7% higher than the 5.44x industry average.
It is no surprise that CGC has an overall F rating, which equates to a Strong Sell in our POWR Rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting. Also, the stock has an F grade for Value and Momentum.
Click here to see the additional POWR Ratings for CGC (Stability, Quality, Sentiment, and Growth). CGC is ranked #181 of 188 stocks in the F-rated Medical – Pharmaceuticals industry.
Click here to checkout our Healthcare Sector Report for 2022
Cresco Labs Inc. (CRLBF – Get Rating)
Chicago’s CRLBF is a cannabis operator in the United States that manufactures a suite of cannabis extracts and vape products. The company offers a wide range of products, including vape pens, capsules, edibles, sublingual oils, and other products. It operates under the brand names: Cresco, High Supply, Good News, Wonder Wellness Co., Remedi, Reserve, Flora Cal, Mindy’s Edibles, and Kiva.
For the third quarter, ended Sept. 30, 2021, CRLBF’s revenue increased 40.6% year-over-year to $215.48 million. However…
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