The Zacks Analyst Blog Highlights: GW, Innovative Industrial, Canopy, Aurora And KushCo
Zacks Investment Research | May 01, 2019 10:13PM ET
For Immediate Release
Chicago, IL – May 2, 2019 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include GW Pharmaceuticals plc (NASDAQ:GWPH) , Innovative Industrial Properties Inc. (NYSE:IIPR) , Canopy Growth Corp. (NYSE:CGC) , Aurora Cannabis Inc. (TO:ACB) and KushCo Holdings Inc. (OTC:KSHB) .
Here are highlights from Wednesday’s Analyst Blog:
Invest Carefully in Rosy -- but Risky -- Marijuana Industry
The marijuana industry has strong potential especially after legalization for recreational and medicinal use. Moreover, the industry is enjoying benefits of expansion into other industries like food, beverage, tobacco and cosmetics.
The much-awaited Cannabis Banking Bill was finally passed by the House Financial Services Committee on Mar 28. This opens up avenues for legal and effective financing for marijuana companies in the United States.
However, investors should be careful as several stocks of this industry have already skyrocketed even as the industry has been tagged as highly volatile.
Cannabis Banking Bill: A Key Catalyst
On Mar 28, the House Financial Services Committee voted 45-15 in favor of passing the Secure and Fair Enforcement Banking Act of 2019 or the SAFE Banking Act. The bill seeks to safeguard the process of financial lending to cannabis companies in the United States. This would not only protect the industry’s credit lines but also aid cannabis ancillary industries in the country. The ancillary sector has been suffering from financial uncertainties associated with the legal status of marijuana in the past.
Cannabis is getting approval from many U.S. states for recreational uses, in addition to medical usage. Though pot remains entirely illegal at the federal level, currently 47 U.S. states offer some form of legalized marijuana for sale.
Strong Market Potential
Research firm Euromonitor has estimated that the American market for legal marijuana products will reach $20 billion by 2020 from a mere $5.4 billion in 2015. According to the Arcview Market Research, the U.S. legal cannabis market is expected to reach $23 billion by 2022. Research firm Cowen projected that the market size of the U.S. legal cannabis industry will reach $75 billion in by 2030, surpassing the carbonated soft drink market in 2017.
Per a study conducted by Colorado cannabis consulting firm Freedman & Koski, Illinois’ annual marijuana market could be between $1.69 billion and $2.58 billion. Overall, U.S. consumer spending on legal cannabis is expected to reach $22.2 billion by 2022, while Canadian spending is estimated to hit $5.9 billion, per a January report by Arcview Market.
Extremely Volatile Industry
The marijuana industry is considered extremely volatile. Most of these companies are in their early stages of development and characterized as risky for investors. Even a minor negative development may cause major stock price fluctuations.
Notably, in October 2018, the news of supply shortages resulted in panic selling as investor’s look to offload risky stocks. According to some industry experts, 5-10% share price volatility daily should not be considered as unnatural for this industry.
Potential Winners
Cannabis stocks are solid long-term bets. Of these, stocks with a Zacks Rank #3 (Hold) or better and solid long-term growth potential are worth trying out despite the latent risks. We have narrowed down our search to five such stocks.
GW Pharmaceuticals plc a biopharmaceutical company, focuses on discovering, developing, and commercializing cannabinoid prescription medicines using botanical extracts derived from the Cannabis plant. The stock carries a Zacks Rank #2 (Buy). You can see Zacks Investment Research
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