As an increasing number of countries have legalized or have plans to legalize cannabis at the federal level. Thus, cannabis producers are among the high-growth areas of the market that surged on initial excitement around Canadian legalization in 2017/2018. Since then, a number of manias have popped up, which have resulted in significant valuation surges for these stocks over short periods of time.
However, growth hasn’t materialized as many experts expected in recent years. Many companies in this sector also loaded up on debt and equity financing when times were good. Now, when investors want to see a return on their investment, there really isn’t much to go around.
With that said, there are a couple companies that I think could fit into the speculative bucket for investors betting on a momentum-driven surge in June. While risky, these are two cannabis stocks growth investors may want to keep on the radar, if growth begins to pick up in the coming months.
Canopy Growth (TSX:WEED) is a Canadian company that produces and markets cannabis and hemp-based products for both recreational and medical use. Apart from its home country, this organization operates in the United States of America and Germany via various subsidiaries.
Despite its declining share price and very bearish sentiment in this space, Canopy has been working on upgrading its product pipeline. Recent reports highlight a deal between Canopy and India Ltd. to manufacture Wana-branded edibles in the Canadian market. The contract states that Indiva will get the exclusive rights to produce and supply the products in Canada for five years. This term can be renewed for an extra five years with a mutual agreement.
Moreover, according to the deal, Canopy Growth will purchase approximately 37.2 million shares of Indiva Ltd. at US$0.0579/share. This amounts to around US$2.2 million, providing the former with a 19.99% stake.
According to Canopy’s chief executive officer David Klein, this deal will provide the organization with increased control over Wana brand’s value chain. It will also ensure top-grade product manufacturing. For those bullish on the profitability potential of value-added products in this space, this is a small deal that could have a big impact on Canopy’s valuation if investors jump aboard.
Aurora Cannabis (TSX:ACB) manufactures, distributes and sells cannabis and its related products for consumer and medical use. Its key markets lie in Canada, the E.U., South America, Australia, and the Caribbean.
This company has recently introduced two high-THC products to their German portfolio. They are meant for medical use but will enable doctors to provide tailored treatment to those patients who have high THC needs. For those who are bullish on growth in the medical marijuana space, this is certainly one treatment to keep an eye on.
Additionally, Aurora has joined forces with Strainprint to assist patients using medical cannabis on their wellness journey. The latter is an app which helps individuals keep track of which CBD and THC levels, ingestion patterns, dosages, strains, etc. are working the best for them.
Through this partnership, Aurora can support patients on every step on their road to recovery. Furthermore, this application is free to download and is available on both iOS and Android.
Both companies have strong growth and expansion plans in motion but are clearly speculative bets in this current environment. While I would personally not put any capital to work in these two names right now, I can also see why some investors may be keen on jumping into these stocks on any sort of material catalysts in June.