3 Marijuana Stocks That Could Fall 47% (or More), According to Wall Street
After a nearly two-year hiatus, marijuana stocks are again one of the hottest investments on Wall Street. In the U.S.,
Following a slow start, monthly pot sales in our neighbor to the north are hitting all-time highs. North America represents a potential $75 billion opportunity for the cannabis industry by the end of this decade.
But not all pot stocks have Wall Street professionals convinced of their success. Three
HEXO: Implied downside of 47%
As you're about to see, Wall Street investment banks aren't thrilled about Canadian pot stocks. It all begins with Quebec-based HEXO (NYSE: HEXO), which would need to fall by 47% to reach Wall Street's one-year price target.
I'll be the first to admit that HEXO fooled me big time. It signed what's still the
HEXO made a big mistake by acquiring Newstrike Brands in 2019 when it didn't need added production capacity. It's also been leaning on value-based dried cannabis flower to create a loyal base of customers. Unfortunately, this value-focused cannabis is crushing its margins and ensuring that HEXO continues to lose money.
Even more concerning is the company's
These issues make HEXO a pot stock worth avoiding.
Cronos Group: Implied downside of 53%
Another cannabis stock Wall Street dislikes is Ontario-based Cronos Group (NASDAQ: CRON). Based on the closing price of Cronos last weekend, the consensus among analysts is that the company could fall 53% over the next year.
The biggest positive for Cronos is that it's a cash-rich company. In March 2019, it
The problem for Cronos Group is that the launch of derivatives in Canada was delayed until mid-December 2019, and it's been plagued by supply bottlenecks for about a year. With only 40,000 kilos in annual production potential at Peace Naturals, Cronos is banking on derivatives to carry the company.
The other issue for Cronos Group is that its cash pile is whittling away. The company
With the exception of this cash, Cronos doesn't have much going for it.
Sundial Growers: Implied downside of 58%
However, the biggest potential train wreck, based on Wall Street's consensus price target, comes courtesy of cannabis
The recent surge in shares of Sundial can be traced to Joe Biden's victory in November and
There seems to be two reasons behind Wall Street's blatant skepticism. First of all, Sundial Growers is in the process of transitioning from a low-margin wholesale model to a higher-margin retail model. This shift isn't going to happen overnight and has resulted in ongoing losses for the company.
Secondly, but maybe more importantly, Sundial has been
In fact, you might also add to the list that Sundial's sub-$1 share price is insufficient to maintain its listing on the Nasdaq. Similar to what HEXO recently did, Sundial Growers
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Cannabis legalization is sweeping over North America – 15 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.
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