Investors should not get overly excited about President Biden’s decision to reclassify marijuana. The potential move toward becoming a less dangerous schedule 3 drug is lengthy and will not result in cannabis becoming federally legal. That has important implications in relation to access to financing for cannabis firms among other things. This has led to investors considering if there are any cannabis stocks to sell as the road to Federal legalization is still long.
Nothing has changed following the announcement meaning the massive spikes in cannabis stock prices will be followed by declines. Here are three cannabis stocks to sell before they cause your portfolio to go up in smoke.
Tilray (TLRY)
Tilray (NASDAQ:TLRY) is part cannabis company, part alcohol firm and overall a business that continues to be troubled.
Investors who follow the stock will note that the company has had to reinvent itself to limited success. Tilray began its life as a cannabis firm but ultimately failed to find anything approaching profitability in that endeavor.
The company has a long track record of attempting to reinvent itself that should not inspire investors. It merged with Aphria back in 2020 to form the world’s largest cannabis firm. At that time Aphria had just purchased Sweetwater Brewing, establishing the brand as a cannabis and craft beer firm. Then the company bought more beer brands. And then, at the end of last summer the company bought eight more beer brands.
Alcohol revenues currently account for roughly 1/3 of Tilray’s sales. I’m not saying that’s necessarily good or bad, it’s just that the company is difficult to pin down. Regardless, the company continues to lose substantial amounts of money, in excess of $100 million in the most recent quarter. Meanwhile, its debt continues to grow.
Curaleaf Holdings (CURLF)
Curaleaf Holdings (OTCMKTS:CURLF) is another cannabis stock to sell that ostensibly benefits from the news surrounding reclassification. I’d like to reiterate that the news is not going to result in any immediate changes and that any real changes will take a long time.
Ultimately, the excitement around the news will dissipate and that will leave investors to look at earnings reports. Fortunately, Curaleaf Holdings recently released earnings which we can look at very easily.
Unfortunately for the company, the results were not very good and raised some serious questions. First of all, Curaleaf Holdings saw its sales increase by a paltry 2% during the quarter. Like most other cannabis firms, it continues to lose money. In the first quarter the company ended up reporting a net loss of $48.3 million. Federal deregulation of marijuana would open up markets which would help the company to find revenue growth that it needs. Again, that’s far away at the moment.
Aurora Cannabis (ACB)
Aurora Cannabis (NASDAQ:ACB) Continues to tout relatively unimportant metrics including EBITDA in an effort to convince investors of its strength. The firm’s most recent earnings report focused on the fact that the company produced modest positive EBITDA for the fifth consecutive quarter .
I’m not saying that improving that metric is negative, it isn’t. But I am saying that Aurora Cannabis isn’t improving in more important metrics. for one, revenues barely grew in all of 2023. Moreover, the company continues to lose a lot of money. Positive earnings before interest, taxes, depreciation and amortization don’t really matter when your net losses continue to be in the tens of millions of dollars.
The only worthwhile cannabis stocks are those that have managed to find profitability. Aurora Cannabis is not one of them and any positive movement stemming from the reclassification efforts will amount to naught.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
