Cannabis Investor Optimism?

One Analyst “Calls Bottom” of Canadian Cannabis Stock Declines – LPC

Despite recent bad news from various quarterly reports, at least one analyst is displaying cannabis investor optimism. Cantor Fitzgerald Analyst Pablo Zuanic said that now is a good time to start looking at long-term cannabis investments.

“We are calling the bottom on Canadian cannabis stocks and think positive catalysts far outweigh negative ones,” Zuanic said.

The market doesn’t seem so sure. Cannabis investor optimism is likely at an all-time low since cannabis was legalized in Canada last year. Yesterday (Nov. 12, 2019), both Cronos and Tilray missed revenue estimates due to oversupply and declining prices. However, the companies also mentioned other reasons (see below).

Many expected bad news this week. In late October, there were already signs that cannabis shares were down. Earlier that month, media reports spread of Aurora dumping $20 million of cannabis supply.

So what does Zuanic think is going to change?

Cannabis Investor Optimism Based on Expanding and Maturing Markets – LPC

Zuanic listed a number of reasons for cannabis investor optimism. He sees strong growth in recreational sales due to (he predicts) double the number of retail stores next year and so-called Cannabis 2.0 products such as cannabis vaping and edibles. (Zuanic said that vaping sales would depend largely on the results of any vaping illness investigations and resulting new regulations.) He also expects there will be further consolidation in the cannabis industry.

Zuanic also mentioned international sales of medical cannabis. He expects it to reach $2.7 billion by 2022.

Is this level of cannabis investor optimism warranted? Both Cronos and Tilray attribute their losses in part to their continuing long-term growth strategy. Last quarter, Tilray CEO Brendan Kennedy said that chasing cannabis profits was constraining.

In the history of the stock market, every boom is followed by declining prices. Then, the market matures and levels out. The Canadian cannabis market doesn’t seem to be any different. If the bottom is here, then this would be a good time to find cheap stocks. The trick, of course, is to pick the right ones. Click the link below to see Zuanic’s analysis of six stocks

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