Why This Recently Listed Pot Stock Could Soar Past Aurora Cannabis Inc.

Aurora Cannabis Inc. (TSX:ACB) may have run out of steam, and investors might be better off jumping ship to this newly listed pot stock.

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The marijuana industry has seen many new entrants list on the TSX in just the past year, and there will likely be even more to come as we inch closer to legalization day. While Aurora Cannabis Inc. (TSX:ACB) and Canopy Growth Corp. (TSX:WEED) are dominating the Canadian markets today, there is a new competitor that could change all of that.

Cannex Capital Group Inc., which is not yet listed on the TSX and may not be for some time, owns the largest pot producer in Washington State: Northwest Cannabis Solutions. The company has set its sights on the Canadian Securities Exchange and began trading this week under the ticker symbol CNNX.

It’s unlikely that it’ll get onto the main Canadian exchange, as the TSX has already warned companies that even having interests in the U.S. could result in a stock being delisted. While Cannex will not be able to tap into the TSX anytime soon, at least not until pot is legalized at the federal level in the U.S., even the Canadian Securities Exchange is a big improvement for the company.

Cannex’s chief operating officer Leo Gontmakher stated that “it’s virtually impossible” to be able to raise funds in the U.S. given the risks involved, especially with all of the confusion as to whether or not federal laws will be enforced. As a result, big investors remain on the sidelines until those ambiguities disappear, and that may take a long time.

Why this could be a great opportunity for investors

The one disadvantage of Canopy and Aurora is that the stocks don’t have access to a potentially lucrative U.S. market. Cannex is certainly limited in its ability to grow as well, but as long as the feds continue to turn a blind eye to what the individual states do, there is a lot of potential for the company to scale its operations as more states legalize marijuana.

With Cannex trading at just over $1 a share, it has a lot of upside from here. By comparison, Aurora has risen more than 300% in the past year, and with the stock trading at 180 times its sales, it’s hard to see much more upside from its current price.

Cannex produced 8,500 kilograms worth of cannabis last year, and with a wide range of products, including edibles, there are many ways for the company to continue to grow, especially if it is able to branch out into other states. The potential for the market in the U.S. could easily eclipse what we see in Canada, and that’s why getting in early on Cannex could be vital.

Takeaway for investors

While Cannex might see limited upside until it gets listed on a bigger exchange, there is still a lot of potential for the stock.

This also serves as a reminder to cannabis investors that this new industry will go through a lot of changes in the future, and while Canopy and Aurora Cannabis are the big players today, that can quickly change.

Many investors are waiting for the day when cannabis gets legalized in the U.S., as it won’t be until then that we see all the cards on the table.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor David Jagielski has no position in any of the stocks mentioned.

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