There’ve been countless cannabis companies that became penny stocks this year. Though many industries suffered from COVID-19 related events, marijuana penny stocks have been sliding for months. Much of the discussion has centered around the production, distribution, and general availability of cannabis products.
It seems, however, that the bigger focus this year isn’t Canada as it has been previously. Rather, traders have put a stronger focus on MSO – multi-state operators – in the U.S. We are in an election year, remember, so legislation is likely to become a topic of conversation.
Former Vice President Joe Biden chose his running mate in Kamala Harris this week. That has triggered momentum for a few sets of penny stocks. We discussed this idea earlier this week that a Biden/Harris duo could have sparked speculation for some industries. One of them has been cannabis. According to MarijuanaStocks.com, “Although there have been a few times where Harris has denounced marijuana, since 2019, she has been starkly in favor of it…But, what we do know is that she could potentially be big news for U.S. marijuana stocks…If Harris comes out in full support of legalizing cannabis, it would be great news for U.S. marijuana stocks.”
What will ultimately transpire is yet to be seen, obviously. We don’t know the outcome of the election nor the chances of further legislative actions being taken thereafter. What we do know, however, is that speculation is playing a big part right now in pot stocks. Will it be something that lasts through the election or is it just a short-term catalyst. Time will tell but in the mean time, we’re seeing a few marijuana penny stocks taking off this week.
Marijuana Penny Stocks To Buy [or avoid]: Hexo Corp.
Most of the NASDAQ and NYSE listed marijuana stocks aren’t penny stocks. But there are a few still left trading below $5. One of them that we’ve continued to watch is Hexo Corp. (HEXO Stock Report). The last time we talked about the company, Hexo had just announced the launch of medical cannabis products in Israel. This is through a 24-month agreement with Israeli medical cannabis company, Breath of Life International Ltd. According to the company, HEXO completed the first shipment of 493 kilograms even amid coronavirus restrictions, internationally.
One of the pending items that finally got clarity was a financing deal Hexo was working to close. Today the company announced that it completed its equity program. Under the this program, the company sold an aggregate of 33,921,979 common shares between June 18, 2020 and July 31, 2020 for total gross proceeds of C$34,497,272.
Armed with a few million dollars, the company said it would use the money for several items. That includes working capital, debt repayments, and the like. Late last month Hexo announced that its line of vape products are now available across Canada. HEXO’s vape products currently include three ready-to-use vape pens and four 510-thread cartridges, in popular strain-inspired terpene blends. HEXO vapes are available across Canada to both adult-use and medical consumers.
Marijuana Penny Stocks To Buy [or avoid]: Aphria Inc.
Another one of the marijuana stocks to watch this week was Aphria Inc. Momentum has been building since the beginning of the month. Aphria had announced a strategic supply agreement with Canndoc Ltd., a subsidiary of InterCure Ltd. one of Israel ‘s largest and most established medical cannabis producers. Specifically, during the first two-year term and each additional term Aphria will provide Canndoc with 3,000 kgs. of bulk dried flower. It will be processed into finished product, co-branded under the Aphria and Canndoc brand names, and sold exclusively within the Israeli market.
In the company’s last round of earnings, Aphria reported increased revenue comere to initial forecasts. However, the company swung to a net loss of C$98.8 million from net income of C$15.8 million during the same period last year. as a C$64 million impairment was recorded on its international businesses in response to the COVID-19 pandemic and losses from changes in the fair value of long-term investments.
Last time we talked about Aphria, had gained some analyst interest from Pablo Zuanic of Cantor Fitzgerald. He said that “the industry’s higher B2B recreational sales in the March quarter.” Zuanic reiterated his Overweight rating for Aphria and raised his price target from CA$10.50 to CA$11.
“We think LPs like APHA, with positive EBITDA, consistent domestic rec/med market share gains, and which are sensibly building businesses overseas (MJ reg issues notwithstanding, we should remember 95% of the world’s population lives outside NA, and we still think MJ deregulation will be a global phenomenon), will outperform,” he said in a note. Something else to note is that the company presents at the Canaccord Genuity Global Growth Conference today at 3 PM EST. Given all of this, will APHA be one of the marijuana penny stocks to buy or ignore leading up to the elections?
Marijuana Penny Stocks To Buy [or avoid]: Sundial Growers Inc.
Shares of Sundial Growers Inc. took off late in the afternoon on Wednesday then came sharply back down just before the close. Within a matter of about 2 hours, SNDL stock made a new intra-day high and low in the August 12th session. Later during the after market session, however, the momentum for SNDL picked up again.
The company is set to report earnings after the closing bell on Thursday, which could be a “risk/reward” scenario depending on the outcome. Keep in mind that coronavirus has impacted companies differently. While this momentum has been strong, right now that could be based on speculation.
Over the last few months, it’s important to remember a few things. First, the company was working with lenders to extend certain milestones and restructure its credit agreements to build a bit of “financial flexibility”. Sundial also reduced its workforce significantly. It also sold off its U.K. asset, Bridge Farm Group in May to further streamline its business. In a June update, CEO Zach George, explained, “With our improved capital structure and streamlined operations, we have reduced our annual cash obligations, including debt service costs, by more than $50 million. Sundial is now in a much better position to take advantage of the expected continuation of the strong consumer demand and increased sales levels we have experienced to date in 2020.”
As far as Q1 results went, the company saw EPS decline from a $0.24 loss in Q1 2019 to a $0.41 loss per share this year. However, sales did jump considerably, year over year from $1.499 million to $23.037 million. If SNDL is on your list of marijuana stocks right now, keep all of this in mind. Earnings season can be highly volatile especially with pot stocks.