There hasn’t been much good news for CBD oil stocks recently. Many companies hoped that the Canadian cannabis retail environment would improve. Then COVID-19 happened. Many industries continue struggling despite the reopening of markets following the pandemic-led lockdowns.
COVID-19 has taken a toll on many things. Does that include CBD oil stocks? It’s not all doom and gloom, however. Cannabis demand continues to be strong amid the pandemic.
Take, for example, states that have legalized cannabis. According to New Frontier Data, these states are seeing a 23% rise in consumer spending. Furthermore, August spending per user was up 17% higher.
And with the correction over the last few months, many cannabis stocks are no longer overvalued. The bear market eliminated the raging mania in the CBD oil stocks industry. Now, pot stocks are in a position to grow and grow sustainably.
Here are three CBD oil stocks to look at for the eventual cannabis rebound: Cronos Group (NASDAQ: CRON) (CRON.TO), Hexo (HEXO), and Green Thumb (OTCQX: GTBIF).
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Table of Contents
List of CBD Oil Stocks
| Symbol | Name |
|---|---|
| CRON | Cronos Group |
| HEXO | HEXO |
| GTBIF | Green Thumb |
| ACB | Aurora Cannabis Inc |
| GWPH | GW Pharmaceuticals |
This is not a recommendation to buy or sell!
1. Cronos Group (NASDAQ: CRON) (CRON.TO)
The largest reason to consider buying Cronos Group stock is their relationship with tobacco giant Altria Group (NYSE: MO).
In case you didn’t know, 2019 Altria invested $1.8 for a 45% stake in Cronos. Not only was this advantageous for Altra, but the cash enabled Cronos to weather the marijuana crash much better than many of its peers.
We all know that cash is king. And Cronos expanded into the U.S. hemp CBD market relatively quickly thanks to the cash influx from Altria.
Furthermore, just last year, they acquired Redwood Holdings’ Lord Jones upscale hemp CBD brands. Although the COVID-19 pandemic has damaged sales, Lord Jones might be a key growth driver for Cronos.
Keep an eye on them for CBD oil stocks to invest in the stock market.
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Not Limiting Themselves
Before the Altria deal, Cronos moved into the Latin America scene. This move formed the cannabis joint venture Natuera in Colombia.
Nature gives Cronos a foothold in the ever-expanding medical marijuana market throughout Latin America. Perhaps another point not to be overlooked is the test exports of hemp-derived CBD extract to the United States.
Even though no money is being made from these exports, it could well position Cronos in the future.
Cronos has also tapped into the Israel market, selling medical cannabis products. Even though Israel’s population is less than a fourth of Canada’s size, their cannabis usage is sky high; no pun intended.
Unlike other markets, there’s much less black market competition in Israel, which could be profitable.
Be that as it may, Cronos still calls Canada home. Most of their revenue is made on Canadian soil, with the main driver being their cannabis derivatives products.
2. HEXO
HEXO is an adult-use cannabis brand based in Gatineau, Quebec, that focuses on innovative, smoke-free, and traditional cannabis products.
They are an award-winning consumer packaged goods cannabis company that creates and distributes innovative products to serve the global cannabis market.
As one of the country’s lowest-cost producers, HEXO Corp currently has over 1,800,000 sq. ft. of production capacity. The Company serves the Canadian adult-use markets under its HEXO Cannabis, Up Cannabis, and Original Stash brands and the medical market under HEXO medical cannabis.
To say Canada-based pot company Hexo has been under tremendous pressure over the recent months is an understatement. With slower-than-anticipated retail store rollouts in Canada, delays in Canadian approvals for cannabis derivative products, and the impact of marijuana sales in black markets, Hexo’s been feeling the squeeze.
Only three months ago, Hexo sold their facility in Niagara, Ontario, citing too much supply in the market and a slower than expected market development.”
The future was not bright in April for CBD oil stock company Hexo. Because shares were trading below $1 for a 30 consecutive trading-day period, the Company received a delisting notice from the NYSE.
Luckily, they have until December 16 to regain composure and compliance with the NYSE listing rules. Will they make it? We will have to wait and see, but let’s look at their numbers in the meantime.
EBITDA Numbers: HEXO
On a more positive note, HEXO 2020’s third quarter (ending April 30) fiscal results showed a 30% revenue growth and 70.4% Y/Y to C$22.1 million.
Additionally, their adjusted EBITDA loss improved to $4.3 million Canadian. Some of you are probably thinking that isn’t good. But, compared to a loss of $8.5 million at the same time last year and the year prior, I’d say things are looking bright.
For those unfamiliar with EBITDA, it stands for earnings before interest, taxes, depreciation, and amortization. We use EBITDA to measure a company’s overall financial performance and as an alternative to net income. To say this slightly simpler, EBITDA is a measure of profitability.
Meanwhile, HEXO plans to deliver a positive adjusted EBITDA for the first half 2021. This depends on the growth of their retail stores in their two largest markets, Ontario and Quebec. Nevertheless, they are concerned about the timing of the licenses for their new retail stores, as this will impact their EBITDA.
HEXO Is Expanding Their Wings
Not to be pigeonholed to one market, Hexo entered into Israel’s medical cannabis market in an agreement with Breath of Life International Ltd.
And in April, they expanded their wings even further with a partnership with Molson Coors. Together with Molson Coors, they formed a joint venture called Truss CBD USA to make non-alcohol hemp-derived CBD beverages in Colorado.
And just last month, the J.V. launched five CBD and THC-infused beverage brands across Canuck country.
What Are the Analysts Saying?
On July 22, analyst Pablo Zuanic with Cantor Fitzgerald upgraded Hexo to Hold from Sell. Moreover, he increased the price target to C $ 0.90 from C $ 1.25 due to the industry’s improving trends and the investing opportunity arising from the Company’s recent pullback.
Zuanic said he expects the stock to perform more in line with the group. All of this is based on solid underlying sales trends in the April quarter, improving profitability and HEXOS anticipation of a positive EBITDA by fiscal 2H21. (See HEXO stock analysis on TipRanks).
Should You Buy CBD Oil Stock Hexo? Even though Hexo stock has plummeted 57.2% year-to-date, the average analyst price target of $0.86 could mean a possible upside of 24.6% in the coming months.
TheStreet gives a Hold consensus for Hexo based on 1 Buy, 2 Holds, and 1 Sell rating.
3. Green Thumb (OTCQX: GTBIF)
With 13 manufacturing facilities and 96 retail distribution licenses across 12 U.S. markets, Chicago-based Green Thumb Industries is a leading U.S. cannabis grower. On the whole, Green Thumb is among some of the few cannabis companies turning a profit.
Green Thumb is benefiting from the rising demand for medical and recreational cannabis in the U.S.
EBITDA Numbers: Green Thumb
On a positive note, Green Thumbs EBITDA surged 38.6% to 145% and year over year to $35.4 million. And one of the main reasons for the surge is their expansion efforts.
For example, Green Thumb completed construction at its Toledo Processing Facility in Ohio just two months ago. Additionally, they’re on track to complete their Illinois and Pennsylvania expansion projects in Q3.
These facilities coming online will almost double the Company’s operating power in the cannabis industry.
Moreover, Green Thumb added six more retail stores to 48 stores over ten states. Not only are they expanding their real estate footprint but their web presence as well.
Green Thumb is ramping it up with investments in its e-commerce platform and enhancements to its digital storefront.
It might be worth watching this sector in general for a Santa Rally.
Is CBD Oil a Good Investment?
CBD has become increasingly popular. As a result, would investing in CBD oil stocks be a good thing? We’ve seen what happened to the marijuana market when Canada legalized pot, as well as states within the US. Pot stocks did not skyrocket as everyone thought. Therefore, only trade CBD oil stocks based on technical and fundamental analysis.
CBD has become very mainstream. As a result, the industry has taken off. People have come to understand the medicinal aspects of CBD oil. Therefore, it’s lost its stigma. Even the NFL has to consider its benefits as the players lobby for it. That would make CBD oil stocks a potentially good buy.
Final Thoughts: CBD Oil Stocks
In correspondence to investors, Cantor Fitzgerald analyst Pablo Zuanic explained that deregulation and sales going forward would continue to push up the price of multi-state operator stocks.
According to Zuanic, this CBD oil stock has some of the best profitability among his “Buy” rated stocks and “has the complexity risk of scale and deal integration.”
Further, he believes that sustained profitability of over 30% EBITDA margins and franchise strength in key states will drive EBITDA multiples over time to at least 20 times. (See GTBIF stock analysis on TipRanks)
Earlier this month, on September 2, the price target for Green Thumb went to $29 from $27 and maintained a Buy rating.
What Is The Street Saying? The same thing! Not only does The Street share Zunaic’s optimism, but they also give it a Strong Buy consensus.
All this is based on 8 Buys and no Holds or Sell ratings. If things couldn’t get any better, Green Thumb stock has risen an impressive 42.2% in 2020.
When you invest, you invest for the long haul. So before you invest in any CBD oil stocks or magic mushroom stocks, for that matter, you need to do your homework.
