A year ago, marijuana stocks could do no wrong. It was close to heaven for the owners of the shares.
But of course, sentiment has reversed, and marijuana stocks have become pretty much nightmarish! When it comes to high-growth industries, however, this is nothing new. Their boom-bust cycles can be grueling.
Yet it is in such times that nice opportunities emerge.
I would stick with the dominant cannabis players that have enough cash to survive and acquire competing marijuana companies at cheap prices. Investors should also look for cannabis companies with diverse product platforms. One company that meets all these criteria is Aurora Cannabis (NYSE:ACB) stock.
The Pros and Cons of Aurora Cannabis Stock
First of all, ACB stock certainly has its issues. The growth of the Canadian market has not lived up to some investors’ lofty expectations. Cannabis companies have also faced supply-chain and quality-control challenges. What’s more, overall demand for cannabis has been disappointing. Even worse, the market has been adversely affected by black-market activities.
Then again, it seems that Wall Street has already factored in much of the bad news into ACB stock. Since March,its price has gone from $10 to a lowly $3.60.
But ACB stock does have some positive characteristics. Keep in mind that Aurora has a presence in markets aside from the Canadian recreational cannabis space. Specifically, the company is well-positioned to be a strong player in the fast-growing medical segment.
Consider that the company has more than 40 highly educated researchers and has conducted a long list of clinical trials and case studies. During its last reported quarter, its domestic patient roster rose 10% to over 84,000.
Take a recent announcement from the University of Saskatchewan. According to the university, the school’s preliminary research indicated that CanniMed 1:20 oil (which includes CBD and THC) could treat seizures in children.
What’s more, ACB has been aggressively expanding in global markets. It has made substantial inroads in Europe and Latin America, and it currently has 15 production facilities outside of Canada.
But ACB stock can also be boosted by the Canadian recreational market. Beginning next month, Aurora stock will probably get a meaningful, positive catalyst from the legalization of edibles in Canada. ACB has been taking meaningful steps to capitalize on this opportunity.
And finally, I think it is worth taking into account that ACB has brought on Nelson Peltz as a strategic advisor. He is one of the most renowned activist investors, having taken positions in companies like Procter & Gamble (NYSE:PG), Mondelez (NASDAQ:MDLZ), and Wendy’s (NASDAQ:WEN). He’ll certainly introduce ACB to many big players, especially in the consumer products sector.
The Bottom Line on ACB Stock
The plunge of marijuana stocks has definitely been frightening. It has spared no cannabis company, even the tier-1 players like Canopy Growth (NYSE:CGC), Aphria (NYSE:APHA) and Cronos Group (NASDAQ:CRON). In light of this beating, investors are understandably gun-shy right now.
But a contrarian approach does seem reasonable now. Sentiment towards marijuana stocks is downright awful. Yet at the same time, some top-notch cannabis companies should do well over the long term. And for the most part, ACB stock deserves to be on that list.
Tom Taulli is the author of the book, Artificial Intelligence Basics: A Non-Technical Introduction. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.