There hasn’t been much good news for CBD oil stocks so far this year. Many companies hoped that the Canadian cannabis retail environment would improve in 2021. Then COVID-19 happened. Many industries are continuing to struggle despite the reopening of markets following the pandemic-led lock downs.
COVID-19 has taken a toll on many things. Is that including 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 spend per user was up 17% higher.
And with the correction over the last few months, many cannabis stocks are no longer overvalued. In fact, 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).
Arguably 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, in 2019, Altria invested $1.8 for a 45% stake in Cronos. Not only was this advantageous for Altra, but the cash also 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 put a damper on sales, Lord Jones just might be a key growth driver for Cronos.
Keep an eye on them for CBD oil stocks to invest in, in the stock market.
Before the Altria deal, Cronos moved into the Latin America scene. This move formed the cannabis joint venture, Natuera, in Colombia.
By the same token, Natuera 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 put intended.
Unlike other markets, there’s much less black market competition in Israel, which could prove to be quite 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.
HEXO is an adult-use cannabis brand based in Gatineau, Quebec, that focuses on innovative, smoke-free and traditional cannabis products.
HEXO Corp is 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 more than 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, delay’s in Canadian approvals for cannabis derivative products, 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.”
Back in April, the future was not looking bright 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? Well, we will have to wait and see but in the meantime, let’s have a look at their numbers.
On a more positive note, HEXO 2020 third quarter (ended 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 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 a little simpler, EBITDA is a measure of profitability.
Meanwhile, HEXO has a plan to deliver a positive adjusted EBITDA for the first half of 2021. Now, this, of course, depends on the growth of their retail stores in their two largest markets, Ontario and Quebec. Nevertheless, they are concerned over the timing of the licenses for their new retail stores, as this will impact their EBITDA.
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 just 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.
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 stated that he expects the stock to at least 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.
All things considered, TheStreet gives a Hold consensus for Hexo based on 1 Buy, 2 Holds and 1 Sell rating.
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.
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, just two months ago, Green Thumb completed construction at its Toledo Processing Facility in Ohio. Additionally, they’re on track to complete its 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, taking them 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.
Might be worth watching this sector in general for a Santa Rally.
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 all of his “Buy” rated stocks and “has the complexity risk of scale and deal integration.”
Further to this, he believes that sustained profitability of over 30% EBITDA margins combined with 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 TheStreet Saying? The same thing! Not only does The Street share Zunaic’s optimism, but they give it a Strong Buy consensus as well.
All of 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% so far in 2020.
When you invest, you invest for the long haul. So before you invest in any CBD oil stocks or any stock for that matter, you need to do your homework.