Marijuana stocks have gone through a phase of euphoria in early fiscal year 2019 to a period of extended depression. With President Joe Biden assuming office, there are hopes of…
relatively accelerated nationwide legalization of marijuana. With steady growth, the legal marijuana market is expected to be worth $73.6 billion by 2027.
Looking at the stock price action, it’s very likely that the worst is over for marijuana stocks. While some stocks have surged higher in the recent past, there are others that trade at attractive valuations.
Let’s discuss four undervalued marijuana stocks to buy.
- OrganiGram Holdings (NASDAQ:OGI)
- Hexo Corp. (NYSE:HEXO)
- Sundial Growers (NASDAQ:SNDL)
- Aurora Cannabis (NYSE:ACB)
Marijuana Stocks to Buy: OrganiGram Holdings (OGI)
OGI stock has trended higher by 92% in the last six months. The stock however remains undervalued at a current market capitalization of $550 million.
OrganiGram is a provider of medicinal and recreational cannabis in Canada. For the first quarter of 2021, the company’s gross and net revenue increased by 42% and 30% respectively. I expect revenue growth to accelerate further in the coming quarters.
The company has launched 53 new stock keeping units (SKUs) since July 2020. Further, 14 new SKUs are expected to be launched in the second quarter. The company’s brands have been attracting consumer attention. As an example, Shred was the most-searched brand on the Ontario Cannabis Store website for November and December. This is the key reason to believe that top-line growth is likely to accelerate.
OrganiGram also generated positive operating cash flow of $300,000 for the fiscal first quarter of 2021. OGI stock will trend higher if operating cash flows swell in the coming quarters.
OrganiGram ended the most recent quarter with cash and short-term investments of $134 million. Therefore, there is ample financial headroom to invest in new SKUs and branding efforts in the next few quarters.
Hexo Corp. (HEXO)
Like most marijuana stocks, HEXO stock is on a strong run, surging 165% in the last six months. The stock, however, remains attractive from a medium to long-term investment horizon.
For the fiscal first quarter of 2021, HEXO reported revenue growth of 114% on a year-on-year basis. Strong top-line growth is likely to sustain with the company’s expansion beyond Quebec. HEXO already has a leading market share of 33% in Quebec.
HEXO reported operating loss of 60.4 million CAD for the first quarter. For the recent quarter, operating loss narrowed to 2.6 million CAD. HEXO expects to report positive EBITDA in the first half of the year. The company’s operating cash flow is also likely to turn positive in the coming quarters. This is another trigger for HEXO stock moving higher.
Production innovation is another reason to be bullish on the stock. The company has introduced cannabis-infused beverages. According to estimates, the North American cannabis-infused beverage market is…
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