Are Marijuana Penny Stocks On Your List This Month?
We talk about penny stocks every day and marijuana stocks have been part of this discussion. The sector itself has been beaten down for months. Meanwhile, the industry continues to go through its share of hurdles this quarter. The House was supposed to vote on marijuana legalization next week. However, that has been postponed following backlash from certain Democrats.
The MORE Act would effectively legalize marijuana at the federal level and expunge some criminal records stemming from cannabis violations. The actual sale of marijuana would still remain up to the states.
Thought of as a potential catalyst in September, those looking for marijuana penny stocks to buy this week will have to wait a bit longer for this next event. House Majority Leader Steny Hoyer, D-Md., said in a statement the House would pass the MORE Act “later this autumn,” but right now, “the House is focused relentlessly on securing agreement to stave off a damaging government shutdown and continuing to do its job addressing the COVID-19 pandemic.”
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Another COVID-19 related blow to an industry that has actually seen revenue growth during the pandemic. Coming up next week, we’ve got more earnings reports to sift through. One of which is that of Aurora Cannabis Inc. (ACB Stock Report). Tuesday the company reports its fiscal fourth quarter and year-end earnings after the closing bell with a conference call to follow.
How Have Marijuana Stock Earnings Faired?
Whether you’re looking at marijuana penny stocks or higher priced pot names, earnings have been a mixed bag with the most recent round. Back in August and July, we saw earnings from notable cannabis companies including Tilray (TLRY Stock Report), Canopy Growth (CGC Stock Report), and Aphria (APHA Stock Report). These have started to become more akin to the FAANG stocks of the cannabis industry.
While Canopy Growth beat fiscal Q1 estimates, Tilray’s Q2 loss was much worse than even analysts had forecast. Tilray lost $0.66 per share with Wall Street estimating only a $0.27 loss per share. Revenue also came in shy of estimates. Tilray reported a 10% increase from its year ago period to $50.4 million. However, that came in shy of analyst estimates for the quarter of $55.32 million.
On the flip side, Canopy Growth reported a loss per share of C$0.30 compared to estimates of C$0.39 loss per share. Furthermore, its C$110.42 million beat estimates of C$98.7 million. Canopy’s new CEO, David Klein took up a serious cost savings strategy that included layoffs and greenhouse closures. It also consolidated from its international focus for the time being.
In line with Canopy, Aphria also reported a strong fiscal quarter. For its Q4 and fiscal year end 2020, the company beat the FactSet consensus. However, it reported a wider-than-expected loss for the quarter. Furthermore, if you look at all of the charts with these stocks, the trend is the same no matter how well performance was.
Will Aurora Cannabis Become One Of The Penny Stocks To Watch In September?
This begs the question of what’s next for Aurora Cannabis and its stock? The company already effected a reverse stock split earlier this year to get out of penny stocks territory. But that doesn’t seem to have quelled the rampant selling with this pot stock. In May of this year, Aurora conducted a 1 for 12 reverse split. Had that been readjusted for pre-split levels, ACB stock would be worth somewhere in the ballpark of $0.57.
As far as its last earnings are concerned, Aurora actually came through with some strong results. Net revenue, excluding provisions, jumped 18% sequentially to C$78.4 million. This was helped by a 24% increase in recreational consumer cannabis sales. There was also a 13.5% increase in medical cannabis revenue.
What was expected to become a transformational quarter for the pot penny stock turned into nothing more than a parabolic move. Shortly after reporting earnings, ACB stock went right back to selling off and hasn’t paused since. Even news of entry into the U.S. market via an acquisition of Reliva, LLC, a U.S. based CBD company.
Cantor Fitzgerald recently cut its price target on the marijuana stock. Pablo Zuanic maintained an Overweight rating but dropped Aurora’s target to C$17.50 from C$29. “The implied sequential decline in Aurora Cannabis Inc’s June quarter sales and loss of market share are concerning…However, we remain OW and think the valuation is attractive even on the revised outlook.”
Is This A Penny Stock In The Making?
Tuesday can’t come soon enough for some. Jason Spatafora, the Wolf Of Weed Street, explained that “While Aurora was once a cannabis industry darling, those glistening smiles from management were hiding a glaring issue in the background. I think we’ve seen that come to fruition especially after this bloated pot penny stock did its reverse.”
“My concern isn’t that Aurora jumps if it surprises on earnings, it’s the false sense of security it gives new pot stock traders. We saw it happen in May. My focus is on MSOs right now. Aurora’s CBD play in the US is a far cry from what a true MSO would be.”
Spatafora reached fame for calling several rallies in pot stocks and currently teaches traders how to spot opportunities in the market, daily. For the fiscal fourth quarter, the Zacks Consensus Estimate for the bottom line is pegged at a loss of 27 cents per share. The same for revenues stands at $54.4 million, suggesting a decline of 36.3% from the year-ago reported figure.
Something else to consider is that ACB stock has a history of influencing the broader sector. In previous quarters, Aurora’s results have positively and negatively impacted other marijuana penny stocks and higher priced stocks alike. How will this upcoming report influence the cannabis industry and will ACB officially become a penny stock once again? With that, will Tilray be close behind? Leave a comment below and let us know what you think.