Cannabis stocks continue to trade significantly lower than their 52-week highs. Several marijuana investors have burnt money over the last few months. Horizons Marijuana Life Sciences Index ETF (TSX:HMMJ) has also been impacted due to broader market weakness.
HMMJ has fallen 10.5% this month. It fell 13% in August and 11% in July 2019. The ETF is trading at $12.66, which is 55% below its 52-week high of $27. The HMMJ ETF is trading close to its 52-week low of $12.49.
Canopy Growth accounts for 10% of HMMJ. Aurora Cannabis (TSX:ACB)(NYSE:ACB) and Cronos Group account for 9.7% and 8.8%, respectively, of HMMJ. Let us see how HMMJ’s top three holdings performed in September.
Shares of Aurora Cannabis have fallen 15% this month. ACB stock is trading at $6.23, which is 61% below its 52-week high and 3.8% above its 52-week low. We have seen that investors were unimpressed with ACB’s fourth-quarter results, which were reported earlier this month.
Aurora reported revenue below analyst estimates as well as below its own forecast. It has also been impacted by regulatory concerns that have put cannabis companies under the spotlight. Further, the next wave of cannabis legalization was supposed to drive investor sentiment higher resulting in a surge in stock prices.
However, while edibles, vapes, and concentrates are set to be legalized next month, there are growing concerns over vaping products that have caused deaths in the U.S. There has been one death attributed to cannabis vapes in the country. The demand for vaping products has taken a considerable hit, resulting in market weakness this month.
Analysts have a 12-month target price of $10.09 for ACB. This is 62% higher than the stock’s current price.
Shares of Canopy Growth have gained 4.8% this month. Canopy stock is trading at $32.97, which is 57% below its 52-week high and 8.8% above its 52-week low. WEED stock bottomed out last month again, after it announced lacklustre quarterly results.
In September, though Canopy has outperformed HMMJ and peer stocks, we can see that it is trading significantly below its 52-week high. Canopy made a strong start to this month and gained 22% in the first 12 trading days of September. It has since fallen by 13.7%.
Analysts have a 12-month target price of $54.5 for WEED. This is 65% higher than the stock’s current price.
Shares of Cronos Group have fallen 14% this month. Cronos stock is trading at $12.6, which is 62% below its 52-week high and 49% above its 52-week low. I had written about the company’s high valuation last month and why it was a risky buy at the current price.
While investing in cannabis is generally high risk, Cronos was trading at expensive valuations, despite losing significant value.
Analysts have a 12-month target price of $15.11 for CRON. This is 20% higher than the stock’s current price.
Is HMMJ a buy at the current price?
Has the HMMJ ETF bottomed out? Not quite. Investors can expect the ETF to trade lower if regulatory bodies such as Health Canada take strict action against vapes. Almost all the major leading cannabis companies, including Aurora, Canopy, and Cronos have invested in vape products to get ready for Cannabis 2.0.
But investors should know that in case vaping products get banned or if the demand drops due to health concerns, it will result in incremental sales for traditional cannabis products and edibles.