Despite Election Wins, Pot Stocks Get Smoked: 4 to Buy on Weakness

The marijuana industry was rewarded with some big wins on election night, but investors were sellers of the top stocks in the industry. That’s very curious, given that the states that voted for recreational use are situated geographically in very positive and densely populated areas. Adult-use cannabis measures have passed in four states, including New Jersey and Arizona. South Dakota and Mississippi legalized medical cannabis. Uncertainty remains regarding the presidential and Senate races, and that could be the reason sellers had the upper hand, as the final results could have an impact on federal cannabis bills.

We decided to screen our 24/7 Wall St. research universe looking for the top companies in the industry that remain solid buys for patient, aggressive growth investors. These four that look like solid ideas now. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Aphria

This company is very close to achieving positive cash flow. Aphria Inc. (NASDAQ: APHA) engages in the production and supply of medical cannabis. It operates through the following segments.
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The Cannabis Operations segment produces, distributes and sells both medical and adult-use cannabis. The Distribution Operations segment’s operations are carried out through its wholly owned subsidiaries: ABP, FL Group and CC Pharma. The Business Under Development segment includes operations in which the firm has not received final licensing or has not commenced commercial sales from operations.

Cantor Fitzgerald has a Buy rating with an $11.75 price objective. No Wall Street consensus target was posted, and shares were trading early Wednesday at $4.90 apiece.

Aurora Cannabis

This company has made a string of acquisitions to grow the scale of its overall business. Aurora Cannabis Inc. (NYSE: ACB) produces and distributes medical cannabis products. It is vertically integrated and horizontally diversified across various segments of the cannabis value chain, from facility engineering and design to cannabis breeding, genetics research, production, derivatives, high value-add product development, home cultivation, wholesale and retail distribution.

The company’s products consist of dried cannabis and cannabis oil, CanniMed vegan capsules and hemp products, as well as sells vaporizers, consumable vaporizer accessories and herb mills for using herbal cannabis products. It also operates CanvasRX, a network of cannabis counseling and outreach centers, and it provides cannabis analytical product testing services.

Cantor Fitzgerald’s $7 price target comes with a Neutral rating, and again no consensus target was posted, even though other firms cover the stock. Shares were seen early Wednesday at $4.45.
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This is among the largest marijuana companies based on market capitalization. Canopy Growth Corp. (NYSE: CGC) engages in growing, possession and sale of medical cannabis in Canada. Its products include dried flowers, oils and concentrates, softgel capsules and hemps. The company offers its products under the Tweed, Black Label, Spectrum Cannabis, DNA Genetics, Leafs By Snoop, Bedrocan Canada, CraftGrow and Foria brand names.

The company also offers its products through Tweed Main Street, a single online platform that enables registered patients to purchase medicinal cannabis from various producers across various brands. The company was formerly known as Tweed Marijuana and changed its name to Canopy Growth in September 2015.

The $22.62 BofA Securities price target on the shares compares with a recent share price of $18.55.
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Cronus

This company had a major international conglomerate take a large position late in 2018. Cronus Group Inc. (NASDAQ: CRON) is a global cannabis company founded in 2012 and based in Ontario, Canada, with a presence across five continents. Its principal activities are the production and sale of cannabis and cannabis-derived products in federally legal jurisdictions.

Back in December of 2018, Altria agreed to buy a 45% stake in the company for about $1.8 billion, a sign of the new world in which the tobacco company must compete. This strategic partnership provides Cronos with additional financial resources, product development and commercialization capabilities, as well as deep regulatory expertise, to better position the company to compete, scale and lead the rapidly growing global cannabis industry. The investment also gives Altria the option to increase to full ownership if it so chooses down the road.

Raymond James has a Buy rating and a $10 price target. The stock was changing hands early Wednesday at $5.60.
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The bottom line for investors is that once the Pandora’s box for the industry was opened, it likely can never be shut again. While the huge dramatic moves some of the top stocks made a few years back when Canadian legalization was at the forefront may be history, there is good reason to add some of the top stocks in the industry to aggressive growth portfolios, as the outcome of the elections could be very positive for the industry.