The decline in the broader market could weigh on cannabis investors.
The early-in-the-year rally was suspect, and the decline in the broader market could impact cannabis investors. The very low trading volumes and redemptions at the largest ETF were also reasons for concern.
Five members of the index have dropped more than 10%, including Village Farms, Trulieve, Innovative Industrial Properties, Curaleaf, and Cronos Group.
These stocks have seen double-digit declines, and some may be viewed as buying opportunities for investors. However, it’s important to do your due diligence and understand the reasons behind the declines before investing.
Village Farms is an extreme value, and its cannabis business is worth substantially more than its current valuation.
Village Farms is an interesting value play in the cannabis sector. While the stock has pulled back a bit due to an equity offering with warrants, the company’s focus on cannabis alone could be worth substantially more than its current valuation. The stock now trades at just 0.5X tangible book value, which could make it a good opportunity for investors.
Trulieve’s projected margins are much higher than its peers, but if the state of Florida moves towards allowing wholesale, it could pressure margins.
Trulieve’s high margins are impressive, but investors should be aware of potential risks. The company’s large exposure to Florida, its home state, could be a concern if the state moves towards allowing wholesale. However, even if the margins are 20% lower than expected, the ratio would still be a discount to its larger peers.
Innovative Industrial Properties’ recent issues with tenants have caused its stock to plunge in price, leaving an open gap in price, and it trades at just 1.3X tangible book value.
Innovative Industrial Properties is a real estate investment trust (REIT) that focuses on the cannabis sector. Its recent issues with tenants have caused its stock to plunge in price, but there is still an open gap in price. While it may be a buying opportunity for some investors, there are other cannabis stocks that may be more attractive.
Curaleaf’s decline is not surprising, given its premium valuation compared to its peers, and its large ETF holder has been reducing its stake.
Curaleaf’s premium valuation compared to its peers has been a concern for some investors, and its decline is not surprising. Its large ETF holder, AdvisorShares Pure US Cannabis ETF (MSOS), has been reducing its stake in the company, which could be a warning sign for investors.
Cronos Group’s stock has made a multi-year low, but the company has a lot of cash and no debt, and its revenue has been growing and profitability improving.
Cronos Group is a cannabis company that has seen its stock make a multi-year low. However, the company has a lot of cash and no debt, which could make it an attractive investment opportunity. Its revenue has been growing, and its profitability has been improving, which could also be positive indicators for investors.
Cannabis stocks should generally be bought, and there are many superior choices to Curaleaf.
While cannabis stocks may have seen recent declines, there are many opportunities for investors in the sector. However, it’s important to do your due diligence and understand the risks and potential rewards of each stock. Additionally, there may be superior choices to Curaleaf for investors to consider.