1 Oversold Cannabis Stock With Great Upside Potential!

With all the challenges in the pot industry right now, which is the best marijuana stock for both short-term and long-term plays?

| More on:
Cannabis stocks have fallen.

In trading on October 16, 2019, shares of Aurora Cannabis (TSX:ACB)(NYSE:ACB) entered oversold territory, which would be a strong indication that a short-term investment in this giant of the industry could be a good decision.

In a changing market, go with a global leader

A very wise financial master once said, “Be fearful when others are greedy, and be greedy when others are fearful.” That statement surely applies to the cannabis market in general. However, nothing is ever simple.

There are serious problems with the marijuana market, and it will take some time to deal with those problems. But then again, most of these problems have been factored into ACB stock. Even a small amount of good news could easily spark a rally. In terms of a quick profit on Aurora, the oversold condition is worth looking at with caution.

Something to consider with your caution: Aurora Cannabis’s multiyear string of acquisitions has put the company on track to boast the largest production capacity in the entire cannabis industry. More than any of its rivals, Aurora has bet on a major expansion in the global cannabis market.

The facts suggest that there is little chance that the cannabis industry is going to implode on itself, at least from a long-term perspective. If someone wants to invest in the market, Aurora is a favoured cannabis stock for Americans, as an example of the strength of the company.

The bottom line

The cannabis industry is set to be huge. Most analysts believe that by 2030, it will hit the $98 billion mark. Specifically, Aurora Cannabis, with its peak production capacity, is well positioned to benefit from the growth.

The marijuana market appears to be in a “waiting period” now, and producers are running into multiple challenges. Among these difficulties are sufficiently expanding production to meet demand, cutting production costs to match black market prices, developing brands, and overcoming potency constraints.

Aurora is betting big on international markets. Although all top Canadian pot stocks aim to develop an overseas presence, no company has a more diverse presence than Aurora. Including Canada, Aurora has cultivation, export, research, or partnership presences in 25 countries.

At present, Aurora is Canada’s largest producer, which gives the company certain economies of scale. Management has set an annual target of 625,000 kilograms per year by the calendar year 2020.

When it released fourth-quarter results for the fiscal year ended June 30, 2019, Aurora stock missed revenue expectations. ACB stock’s net loss came at $2.3 million on net revenue of $98.9 million, with an adjusted EBITDA loss of $11.7 million.

An investor could easily look at Aurora’s market cap of around $3.5 billion compared to its historical revenue and think the stock is drastically overpriced. But if the global medical cannabis market grows relatively close to what Aurora expects, the stock’s current price could look like a bargain in retrospect a few years from now.

The facts suggest that a smart investor can hedge the risk on a short-term investment play on Aurora with the comfort offered by ACB’s strategy to maintain a real global position in the cannabis industry, which makes the long-term investment appealing as well.

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 Robert Flynn has no position in any stock mentioned.

More on Cannabis Stocks

Powder of Cannabis (Drugs), Analysis of Cannabis in laboratory.
Cannabis Stocks

Canopy Growth: Is There Budding Potential in the Cannabis Market?

Canopy Growth stock hit 52-week lows recently on news of needing to re-file on its BIoSteel business, so what now?

Read more »

Cannabis grows at a commercial farm.
Cannabis Stocks

What’s Happening With Cannabis Stocks in May 2023?

Cannabis stocks were up this week, as the market began to turn, but how long will it last, and is…

Read more »

Cannabis smoke
Cannabis Stocks

Are Cannabis Stocks a Good Buy in May 2023?

If you're going to buy cannabis stocks, these are pretty much the only two I would consider. Even so, you…

Read more »

edit Cannabis leaves of a plant on a dark background
Cannabis Stocks

Aurora Cannabis: Time to Light Up Your Portfolio?

Here's my take on whether Aurora Cannabis (TSX:ACB) is worth adding to a growth portfolio right now, given its growth…

Read more »

Target. Stand out from the crowd
Tech Stocks

These Undervalued TSX Stocks Are a Bargain in May 2023

If you're willing to bet on a rebound, these are the three TSX stocks I would consider first as they…

Read more »

A cannabis plant grows.
Cannabis Stocks

Tilray Stock Is Scraping 52-Week Lows: Will it Bottom Out Soon?

Tilray (TSX:TLRY) stock remains down 53% in the last year, but when will this company hit the bottom and start…

Read more »

Medicinal research is conducted on cannabis.
Metals and Mining Stocks

2 Canadian Stocks That Are Simply Too Cheap to Avoid

These two Canadian stocks have sunk lower and lower, which is why now could be the right time for long-term…

Read more »

Cannabis grows at a commercial farm.
Cannabis Stocks

1 Marijuana Stock I’d Buy Over Aurora Cannabis

Explore a promising marijuana stock that outshines Aurora Cannabis. Unveil the investment opportunity to boost your cannabis portfolio.

Read more »