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Recent market research suggested that global spending on legal cannabis will increase by 230% in 2022. The research also suggested that in 2022, cannabis worth around $31.3 billion will be sold. This shows a rapidly growing trend in cannabis sales, and that is why cannabis stocks are gaining popularity and profitability.
Both the Nasdaq and New York Stock Exchange (NYSE) first listed pure cannabis companies in 2018. Canopy Growth Corp was first listed on NYSE in May while the Cronos Group made its trading debut on Nasdaq earlier that year in February.
Most of the cannabis companies remain penny stocks and are primarily traded in Over-the- Counter (OTC) markets. This increases both the risk perception for any investment and investor skepticism.
Today we are going to discuss some of the most promising cannabis stocks and why you should invest in them.
1. Canopy Growth Corp (CGC)
Canopy Growth Corp is the first Canadian marijuana company and also the largest publicly traded weed company. The company operates and owns many brands. It also produces and markets both recreational and medical strains. Tweed is the company’s most popular brands due to an association with Snoop Dogg. Canopy Growth Corp reported a revenue of about $60 million for the fiscal year 2019.
In the year 2017, Constellation Brands, the beverage giant and the manufacturer of Corona beer bought a stake of 9.9% in Canopy Growth Corp. This deal allows both companies to pursue new product lines such as cannabis-infused beverages.
2. Aurora Cannabis Inc (ACB)
It is a giant pot company which is also based in Canada. It expanded by buying its competitor MedReleaf in an all-stock deal of $250 million. It is the world’s largest marijuana deal until now. Combining workflows and operations will help the new entity in gaining efficiency and cutting costs. It is expected that together, Aurora and MedReleaf expect to produce over 570,000 Kgs of cannabis per year through two facilities in Denmark and nine in Canada. Aurora Cannabis Inc is listed on the Canadian venture stock exchange (TSX), and in the U.S. it is listed on the NYSE.
3. Cronos Group Inc (CRON)
Cronos Group is the first pot stock listed on Nasdaq. Cronos Group is based in Toronto and a cultivator of medical marijuana. Cronos serves international markets in addition to Canada. It is
building a facility in Israel, shipping its product to Germany, and starting a joint venture in Australia. Cronos Group doesn’t operate in the U.S. due to some ambiguity in the regulations. The company reported a revenue of $7.3 million for the fiscal year 2018.
4. Terra Tech Corp (TRTC)
Terra Tech is a diversified agricultural company which operates in dispensing and producing medical marijuana. Its cultivation activities operate under the brand name Edible Greens while its own medical marijuana brand is IVXX. The company also operated medical marijuana retail stores under the name Blum.
Terra Tech operates in the U.S. and has a temporary authorization from the California State for cultivation, manufacturing, distribution, and retail cannabis. It has two large cultivation facilities and Blum dispensaries in Nevada. The company reported a revenue of $8.6 million for the first quarter of 2018.
5. AbbVie (ABBV)
It is a pharmaceutical company which produces a cannabis-based synthetic drug under the name Marinol. It is approved by the FDA and is used for alleviating appetite loss in AIDS patients and nausea in chemotherapy patients.
Marinol is neither AbbVie’s flagship drug nor its biggest seller. The company has several other cannabis-based products which fall under different categories. So, investment in this company’s stock is a good opportunity for diversifying your portfolio.
In 2018, the FDA approved the first drug derived from an active marijuana ingredient rather than a synthetic one. This was a big win for U.K. based GW Pharmaceuticals. The drug is named Epidiolex, and it is being used for the treatment of Lennox-Gastaut, syndrome seizures associated with two severe and rare forms of epilepsy, and Dravet syndrome. GW Pharmaceuticals is listed on Nasdaq as an American Depository Receipt (ADR).
7. Cara Therapeutics (CARA)
This is a biotechnology company which is in the clinical stage. It develops drugs for the treatment of acute and chronic pain and pruritus. It is currently working on both opioid and cannabinoid drugs. The company is working on a cannabis-based product under CB agonist CR701, which is in the pre-clinical trial phase. The stock price is expected to rise rapidly if the trials come out to be successful.
8. Axim Biotechnologies (OTC: AXIM)
This biotechnology company is working on at least 16 cannabis-based drugs which are in different stages of pre-clinical and Phase I & II clinical trials. The drugs will be used for the treatment of dry eyes, opioid addiction, inflammatory bowel disease, and smoking cessation.
9. General Cannabis Corp (OTC: CANN)
This company provides secondary services to businesses and producers in the marijuana industry. The services range from consulting, security, real estate, and business development. This company is based in Denver and also owns the brand Chiefton Supply Co, which is a specialty cannabis lifestyle apparel line.
Risks of investing in marijuana stocks
Investors should think carefully and do their homework when making an investment. The same goes for the cannabis industry. Investors are prone to the following risks,
It is the greatest risk of buying any marijuana stock. It is because the valuations of these stocks have increased very rapidly due to which share prices are no longer reflective of the growth prospects of the stock. The valuation of a stock can be assessed in several ways which include using the stock price in relation to revenue, cash flow, and earning. Doing valuations of marijuana stocks is very challenging because they aren’t profitable yet.
One risk that especially applies to royalty streaming companies and marijuana producers is the potential for commoditization. The commoditization risk is when a product may become indistinguishable from other products. Cannabis is an agricultural crop, and all agricultural crops are commodities.