President Biden has been a long-standing advocate on the decriminalization and eventual legalization of marijuana. Roughly 60% of U.S. adults believe that marijuana should be legalized for medical and recreational purposes. Republicans have also joined this bandwagon, with rep Nancy Mace proposing the States Reform Act.
However, amid surging inflation levels and the resurgence of COVID-19 cases, cannabis legalization doesn’t seem to be a priority of the U.S. government right now. Many cannabis company CEOs are not expecting marijuana to be federally legalized in the United States in 2022.
Given this backdrop, it could be wise to avoid fundamentally weak cannabis stocks of Green Thumb Industries Inc. (GTBIF), Canopy Growth Corporation (CGC), Planet 13 Holdings Inc. (PLNHF), and Flora Growth Corp. (FLGC).
Green Thumb Industries Inc. (GTBIF)
GTBIF, the owner of Rise Dispensaries, manufactures and sells cannabis products for medical and recreational use in the United States. They offer cannabis flowers, cannabis concentrate, edibles, and other cannabis products. Their distribution channels include their retail chain stores that sell directly to customers and third-party retailers.
On October 7, 2021, GTBIF announced opening a new retail store in Illinois as part of its expansion plan. It’s the first store of its kind that offers roll-through car service for patients. However, as marijuana is still illegal in the United States on the federal level, it might take some time for GTBIF to generate adequate revenues to cover the expansions and store opening costs.
For the third fiscal quarter ended September 30, 2021, GTBIF’s total other income decreased 57.7% year-over-year to $836,182. This can be attributed to a 70.8% rise in interest expense. COGS increased 48.5% from the same period last year to $104.16 million.
The consensus EPS estimate of $0.08 for the current quarter (ending December 2021) indicates a 25% decline year-over-year. The stock has declined 14.7% year-to-date.
GTBIF’s POWR Ratings reflect this bleak outlook. It has an overall rating of D, which equates to Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a Growth and Momentum grade of D. In the 196-stock Medical - Pharmaceuticals industry, GTBIF is ranked #119. Click here to see the additional POWR Ratings for GTBIF (Stability, Value, Sentiment, and Quality).
Canopy Growth Corporation (CGC)
Headquartered in Canada, CGC produces cannabis and hemp-based products for recreational and medical use through two segments – Global Cannabis; and Other Consumer Products. It sells its products across Canada, the United States, and Germany. The company also provides capital and strategic support to platforms that pursue investment opportunities in the global cannabis sector.
On October 14, CGC announced its plan to acquire Wana Brands, a leading cannabis edibles brand in North America. This might help strengthen Canopy Growth’s U.S. ecosystem and establish itself as a market leader in the cannabis edibles product category. However, this acquisition is yet to receive federal permissibility.
CGC’s net revenues decreased 3% year-over-year to C$131.40 million ($102.58 million) in the fiscal second quarter ended September 30, 2021. Operating loss and net loss came in at C$215.36 million ($168.13 million) and C$11.06 million ($8.63 million), respectively.
Analysts expect EPS to remain negative until at least June 2022. The consensus revenue estimate of $115.32 million indicates a 4% decline from the same period last year. CGC’s stock declined 63.2% over the past year and 58% year-to-date.
CGC has an overall F rating, equating to Strong Sell in our POWR Ratings system. The stock has a Stability, Value, Quality, Sentiment, and Momentum grade of D. It is ranked #191 in the Medical - Pharmaceuticals industry. Click here to see the additional POWR Ratings for Growth for CGC.
Planet 13 Holdings Inc. (PLNHF)
Founded in 2002, PLNHF is a vertically integrated cannabis company that produces and markets cannabis products for medical and retail use. It operates dispensaries that produce cannabis extract and infused products in Las Vegas and California.
On October 18, PLNHF announced an adjustment to the vesting schedule to previously issued restricted stock units. The company plans to sell its restricted stock units in three equal tranches on November 1, 2021, 2022, and 2023.
For the third fiscal quarter ended September 30, 2021, PLNHF’s revenues increased 44.5% year-over-year to $32.95 million. However, net loss came in at $10.18 million, while loss per share stood at $0.06.
A006Ealysts expect PLNHF’s EPS to remain negative in the fiscal fourth quarter (ending December 2021). The stock declined 29.3% over the past year and 37.8% year-to-date to close yesterday’s trading session at $3.40.
The stock has an overall rating of D, translating to a Sell in our proprietary rating system. It has a Growth, Value, Sentiment, and Momentum grade of D. In the 11-stock Tobacco industry, it is ranked #10. Click here to see the additional POWR Ratings for PLNHF (Stability and Quality).
Flora Growth Corp. (FLGC)
FLGC is a Canadian cannabis company that sells medical-grade cannabis oil, cannabis oil extract, and related products to pharmacies, medical companies, and cosmetic companies. It also develops and sells over-the-counter products such as dietary supplements, Phytotherapeutic and nutraceutical products, supplements, chocolates, and related products. FLGC listed 3.33 million ADRs at $5 each on the Nasdaq Stock Exchange on May 11, 2021, raising $16.67 million in gross proceeds.
FLGC’s operating loss came in at $6 million in the first half of 2021 (ended June 2021). Net loss amounted to $4 million, primarily due to the IPO-related expenses.
The stock has declined 54.2% over the past month and 48.1% over the past six months to close yesterday’s trading session at $2.01.
FLGC’s POWR Ratings reflect its poor prospects. The stock has an overall rating of D, which equates to Sell in our POWR Ratings system. FLGC has a grade of D for Stability and Quality. In the 30-stock Agriculture industry, it is ranked #23. Click here to see the additional POWR Ratings for FLGC’s Growth, Momentum, Value, and Sentiment.
GTBIF shares were trading at $21.02 per share on Friday afternoon, up $0.13 (+0.62%). Year-to-date, GTBIF has declined -14.20%, versus a 21.50% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.
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