Frustration, Not Profits: 3 Must-Avoid Weed Stocks in 2022

Investors who can’t afford to lose their money should forget about weed stocks and avoid the industry leaders in 2022.

Caution, careful

Image source: Getty Images

Investors’ frustrations over cannabis producers, including industry leaders, have grown through the years. Market observers say weed stocks remain speculative bets in 2022, like cryptos. If ever you want exposure to this burgeoning market, don’t invest money you can’t afford to lose.

Canopy Growth (TSX:WEED)(NASDAQ:CGC), Aurora Cannabis (TSX:ACB)(NYSE:ACB), and Tilray (TSX:TLRY)(NASDAQ:TLRY) don’t deserve serious consideration. These three weed stocks were disappointments in 2021, and I doubt things will change for the better anytime soon.

No growth catalyst

Canopy Growth previously bragged that profits are coming in the second half of 2022. However, after reporting a $16.3 million net loss in Q2 fiscal 2022, management has announced a push back in its profitability target. Besides, the $4.13 billion cannabis producer begins the year with a new CFO and chief product officer.

Management said the senior executive changes were “designed to drive execution” toward its priorities. However, analysts say there’s more than meets the eye. Andrew Carter, an analyst at Stifel, said, “We believe the changes point to an organization in disarray with necessary strategic, personnel changes unlikely given Constellation Brands’ control of the board.”

Canopy Growth investors lost 63.6% in 2021 and might not recover their losses this year. Moreover, the postponement of the timeline to hit positive adjusted EBITDA isn’t good news. Garrett Nelson, a CFRA analyst, said, “In our view, the stock now lacks an identifiable catalyst.” WEED currently trades at $10.51 per share (-7.7% year-to-date).

Empty promises

Aurora Cannabis so often misses its EBITDA targets that management no longer makes promises. In Q1 fiscal 2022, the $1.36 billion cannabis producer reported an 11% decline in revenue versus Q1 fiscal 2021. Its net loss of $11.8 million was a significant improvement due to strong medical marijuana sales.

This marijuana stock didn’t deliver in 2021 (-33.6%), so it’s futile to hope for a recovery this year. The cannabis derivatives market in Canada is worth around $2 billion annually but Aurora didn’t introduce more derivatives into the market to capitalize on the opportunities.

The latest management estimate is that Aurora Cannabis will hit positive EBITDA by the first half of 2023. Investors should avoid this weed stock at all costs rather than buy into the false promise again.  

No federal legalization soon

Tilray finished 2021 at $9.25 per share, or 52.2% lower than its closing price of $19.36 on IPO day (May 5, 2021). As of this writing, the share price is even lower at $8.49%. The $4.01 billion company combined with Aphria to better position for growth in the U.S. and Europe.

In Q2 fiscal 2022 (quarter ended November 30, 2021), management reported a net income of US$5.79 million. However, despite the profits and company re-branding, the price went downhill. The new parent name, Tilray Brands, Inc., reflects the company’s evolution from a Canadian LP to a global consumer packaged goods (CPG) company powerhouse.     

Many Canadian cannabis producers hope that federal legalization of marijuana in the U.S. comes soon. Tilray has an advantage because of several acquisitions and partnerships. However, its CEO, Irwin Simon, isn’t optimistic. He doesn’t see U.S. federal legalization for at least the next two years.

Forget the sector

Forget about the cannabis sector in 2022, because weed stocks could sink deeper than last year.

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 Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Brands.

More on Cannabis Stocks

Coworkers standing near a wall
Cannabis Stocks

Why Is Everyone Talking About Canopy Growth Stock?

Canopy Growth stock (TSX:WEED) saw shares surge in the last two weeks for a variety of reasons investors can dig…

Read more »

Pot stocks are a riskier investment
Stocks for Beginners

Why Shares of Cannabis Stocks Are Rising This Week

Cannabis stocks received a boost this week as the White House urged the drug enforcement administration to reschedule the drug.

Read more »

A person holds a small glass jar of marijuana.
Stocks for Beginners

Why Canopy Growth Stock Jumped 16% on Wednesday

Canopy Growth stock (TSX:WEED) is up 16% on Wednesday, adding to a surge of 60% growth in the last week…

Read more »

Pot stocks are a riskier investment
Cannabis Stocks

Is the Worst Over for Canopy Growth Stock?

Down 99% from all-time highs Canopy Growth stock has burnt investor wealth and remains a high-risk investment.

Read more »

Pot stocks are a riskier investment
Cannabis Stocks

Steer Clear: This Stock Spells Trouble

A newly listed cannabis stock is outperforming in 2024 but investors should stay clear to avoid trouble and losses.

Read more »

Cannabis stocks have fallen.
Cannabis Stocks

2 Best Marijuana Stocks to Buy This Month

Marijuana stocks in the U.S. such as Green Thumb and Curaleaf can help you deliver outsized gains to investors in…

Read more »

A cannabis plant grows.
Cannabis Stocks

Can Aurora Cannabis Stock Recover in 2024?

Aurora Cannabis stock is down 99% from all-time highs but remains a high-risk bet, despite its cheap valuation.

Read more »

A person holds a small glass jar of marijuana.
Cannabis Stocks

The Best Cannabis Stock to Buy Right Now

This cannabis stock has jumped 30% in the last few months, with even more growth on the way – all…

Read more »