It is probably the right time for you to think about some marijuana stocks to sell.
Marijuana stocks have been a massive downer this year. The selloff in risky stocks has been particularly hard on the marijuana sector.
One of the leading funds tracking the sector is the AdvisorShares Pure Cannabis ETF, which has lost over 51% of its value this year.
With the current market downturn, investors are gravitating towards stocks that boast incredible underlying businesses. Marijuana companies have grown immensely over the past few years, but they are still from achieving profitability.
The lack of profits makes them tough to invest in, and recent market results reflect that. Having said that, let’s look at a few of these marijuana stocks to sell now.
|VFF||Village Farms International||$2.50|
|IIPR||Innovative Industrial Properties||$88.59|
OrganiGram Holdings (OGI)
OrganiGram Holdings (NASDAQ:OGI) is one of the top Canadian marijuana operators with more than an 8% share in the recreational cannabis market.
In the past couple of quarters, it has grown sales at an incredible pace. However, it still has relatively weak margins that are unlikely to be profitable anytime soon, making it a prime candidate among marijuana stocks to sell.
The Canadian cannabis sector is a challenging market for most players in the space due to oversupply and many competitors.
Though Organigram could potentially benefit from greater economies of scale, its gains will only fuel the oversupply in the market. The company doesn’t have the pricing power that’s needed to generate sizeable profits in the future. Therefore, its stock is likely to struggle in the interim as its business looks to narrow down its losses.
Aurora Cannabis (ACB)
Aurora Cannabis (NASDAQ:ACB) is another Canadian cannabis upstart.
What puts this among the marijuana stocks to sell now is that its stock has been dead money for several years as its underlying business bleeds cash at an alarming pace. It has no near-term catalysts to turn its fortunes around.
Its revenues have been on a downward spiral over the past several quarters, despite acquiring multiple companies. Its acquisitions have done little to turn things around for its businesses and have only widened its losses.
In its most recent quarter, its revenues dropped 8.6% from the prior-year period and 17% sequentially. It posted a whopping CA$1 billion loss in the third quarter. On top of that, its debt levels have almost entirely gobbled up its cash equivalents.
Village Farms International (VFF)
Village Farms International (NASDAQ:VFF) is another Canadian pot stock that’s trading in the red. The stock has shed more than 70% of its value in the past 12 months amidst multiple business challenges.
Skyrocketing inflation numbers have impacted its produce business and increased freight, labor, supply and other related costs. Consequently, these inflationary pressures resulted in VFF reporting a massive net loss in its most recent quarter.
In its second quarter this year, its loss per share came in at 41 cents compared to six cents in the prior-year period. Perhaps what’s more alarming is that despite healthy revenue growth, its free cash flow base has moved southward in the past couple of years.
Though its robust revenue expansion points to a healthy upside in the future, its inability to generate profits remains a major cause for concern.
Canadian cannabis giant Tilray (NASDAQ:TLRY) has hit investors incredibly hard.
Its merger with Aphria was expected to make it a juggernaut in the cannabis space, but the opposite has transpired so far. The combined business is far from reaching its lofty financial targets and continues to bleed cash at an alarming pace.
Its CEO Irwin Simon had set a goal of reaching $4 billion in annualized marijuana sales, but the company has been struggling to grow past the $150 million range each quarter.
At the same time, its U.S. peers have done significantly better in expanding their revenue base. Tilray has failed to juggle its complex marijuana business, which focuses on multiple verticals.
Perhaps the major growth driver for Tilray is its expansion prospects in the recreational cannabis market in Germany. However, it does not technically have a license to operate there either.
Canopy Growth (CGC)
Canopy Growth (NASDAQ:CGC) is another Canadian marijuana stock that’s been struggling under the weight of the current economic climate. However, CGC has fared much worse than its competition, and its spotty track record further solidifies its bear case.
Even before the economic crisis this year, the CGC had found it tough to expand its revenue and earnings base at a healthy pace. The rising inflationary pressures have further accentuated its troubles leading to higher shipping expenses, declining prices, and other related costs.
Additionally, the dwindling revenue and margins have also weighed down its cash flows, which was once a strong suit for the business. Perhaps the main reason its business remains in a relatively good financial position is the $4 billion investment by Constellation Brands, one of the top alcoholic beverage companies.
Nevertheless, its cash balance has been depleting at an alarming pace, and it will be forced to the route of the serial diluters.
SNDL (NASDAQ:SNDL) was one of the most popular meme stocks last year. The retail trading frenzy in 2021 lifted the stock to new heights and helped it build a cash war chest.
However, its core businesses continue to disappoint as it shifts focus from its cannabis segment to its liquor business.
Despite the positive impact of its liquor business, it posted a hefty net loss of CA$72 million in the second quarter, up more than 41% from the prior-year period. Moreover, its gross margins have been negative for the past three years, and its management isn’t working on any plan for profitability.
The apparently strong sales during the quarter were largely attributable to its acquisitions. It continues with new businesses and moving into new verticals without building any competitive advantages in either of them. Therefore it remains one of the riskiest bets in the space.
Innovative Industrial Properties (IIPR)
Innovative Industrial Properties (NYSE:IIPR) is a real estate investment trust that offers exposure to the fast-growing cannabis business.
It involves leasing and purchasing real estate for marijuana operators and has an incredible dividend profile. There’s plenty to like about IIPR, don’t get me wrong, but there are a few elements that weigh down its bull case.
There are concerns over IIP’s business model once marijuana is legalized on a Federal level. It will likely open the doors to multiple financing solutions for operators, putting a dent in their long-term ability to grow revenues.
It’s also facing a class-action lawsuit that was brought against the company on allegations of misrepresentation regarding its business model. If investors can ride out the turbulence, IIPR could be an interesting bet over the long run, but the risks discussed above need to be addressed.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.