Over the past months, the cannabis sector has struggled to a fair degree, but companies involved in CBD have generally experienced growth in sales. Investing in CBD penny stocks could prove to be a clever strategy since it is a growing sector, and many of the penny stock companies could eventually become major players. There is a widespread belief that due to the wellness functions of CBD, the industry could grow into a multibillion industry before long.
As a matter of fact, leading consultancy firm Ernst & Young has estimated that the CBD space could grow into an $11 billion industry by 2025. In such a situation, having a look at some of the CBD penny stocks in the market could be a prudent strategy. The recent turmoil in the markets has resulted in some stocks being available at steep discounts, and that could also be a factor when it comes to choosing the right CBD stock.
Over the past year or so, Aphria has emerged as one of the more promising cannabis stocks in the industry. The company has one of the strongest cash positions in the industry, and that should work to its advantage in the near-term. Aphria will declare its financial results for the quarter ended February 29 in mid-April, so investors will want to keep an eye out for that.
In January, Aphria managed to get the coveted European Union Good Manufacturing Practices certifications, and while that is definitely a positive, it is unlikely that it had much of an impact on the company’s revenue for the quarter. However, analysts believe that the current lockdowns in North America are going to be a boost for Aphria’s sales. People cooped up at home are ordering more cannabis and CBD products. This notion appears to have prompted a rally in Aphria stock.
That being said, the company doesn’t do a ton of direct sales, so it remains to be seen what sort of effect the lockdown period will have on Aphria’s sales figures.
HEXO has been in trouble for quite some time, and recently, it became abundantly clear that the company is facing a significant cash crunch. Management released a notice last month expressing concerns about HEXO’s continued business. The pandemic has sent capital markets into a tailspin, and there are growing fears that HEXO might not be able to take care of its financial obligations over the coming 12 months.
In February, HEXO managed to get a syndicated credit facility worth $65 million from the Bank of Montreal and Canadian Imperial Bank of Commerce. The company managed to draw $35 million, but after that, the terms were changed. The new terms stipulated that HEXO would have to raise a minimum of $15 million by April 10. The company is clearly in financial trouble, so the April 10 deadline will, no doubt, be watched quite closely by market participants.
There is a massive liquidity risk with the company at this point, so it will be important for investors to keep an eye on the developments in the coming days.
Organigram Holdings has emerged as one of the more promising stocks in the cannabis sector in recent times. The company is aiming to release its financial results for the fiscal second quarter for 2020 at some point in the middle of April. There is a lot to look for in these financial results.
In the previous quarter, which included the three months that ended in November 2019, the company generated revenue of $25.2 million. That reflected a year-on-year rise of more than 100% and a sequential rise of 54%. Gross margins remain modest at 37% following fair value adjustments, but Organigram did manage a positive EBITDA of $4.9 million.
In the upcoming quarter, it will be interesting to see what the company’s cash cost per gram figure will be. In the previous quarter, it led the industry with $0.61 cash cost per gram. International and wholesale sales made up 38% of the revenue in Q1 2020, but it remains to be seen if there is any improvement in Q2 2020.