Are Marijuana Penny Stocks On Your Watch List In January
Penny stocks are synonymous with “early-stage” companies and industries. Even though legal and medical cannabis has been around for years, it’s still a very young industry. Furthermore, the fact that it isn’t legal at a federal in the U.S. means that there’s still plenty of room for growth. The inauguration of Joe Biden and the 46th President of the United States has quickly placed the focus back on marijuana stocks after a few years of lackluster performance.
On the campaign trail, incoming Vice President Kamala Harris emphasized a commitment for decriminalization stating, “We have a commitment to decriminalizing marijuana and expunging the records of people who have been convicted of marijuana offenses. When you look at the awful war on drugs and the disproportionate impact it had on black men and creating then criminal records that have deprived people of access to jobs and housing and basic benefits.”
New Life For Marijuana Penny Stocks?
Adding more fuel to the fire is the outcome of a vote on the MORE Act. This would effectively legalize marijuana at the federal level. The vote was put on hold in light of more pressing issues regarding new stimulus plans and, of course, the Presidential election. Where most thought the Act faced an uphill battle due to the makeup of the Senate, many now speculate the opposite.
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The Georgia runoffs resulted in a Democrat-controlled Senate and the “Blue Wave” that some had anticipated. There’s still much to be seen after the inauguration next week. However, the market has spoken and marijuana stocks are becoming a clear focus. Many of these are now the hot penny stocks to watch this year. Just take a quick look at some of the cannabis industry ETFs and you’ll see the strength of this trend. The Advisorshares Trust Pure US Cannabis ETF (NYSE: MSOS) has reached new all-time highs this year. Its sister ETF, the AdvisorShares Pure Cannabis ETF (NYSE: YOLO) has mirrored a similar trend. However, it is focused on cannabis companies around the world; not just the U.S.
In light of this industry trend, it could be time to start watching pot stocks. Here are 4 that traders are following closely this week:
Marijuana Penny Stocks To Watch
- Hexo Corp. (NYSE: HEXO)
- Harvest Health & Recreation (OTC: HRVSF)
- Sundial Growers Inc. (NASDAQ: SNDL)
Hexo Corp.
One of the hot penny stocks to watch among cannabis names has been Hexo Corp. Since the start of November, the HEXO stock price has moved higher. A lot of this positive momentum has stemmed from speculation on legalization as well as progress from the company itself. Over the last few months, Hexo has continued executing on key milestones.
One of the most recent came at the end of December. Hexo was granted a worldwide patent titled “Industrial-Scale Processing of Cannabis Material”. This came just a few weeks after the company released its fiscal Q1, 2021 results. These have been one of the high points for traders recently. One of the main reasons has a lot to do with the company’s ability to grow. Net revenue in the quarter, for example, increased 103%, year-over-year to $29.5 million. It was also 9% higher than its previous Q4 2020 figure. The company also posted its sixth straight quarter of Adjusted EBITDA loss improvement. Q1, 2021 saw an 87% reduction from ($3.25M) in 4Q20 to ($0.42M).
Something to also keep in mind this week is that the company presents at the ICR Conference. CEO Sebastien St. Louis and CFO Trent MacDonald will go on at 3:30 PM EST Wednesday. Many times we’ll see companies discuss recent events and achievements with the public. Will any of the recent milestones including its patent get highlighted?
Harvest Health & Recreation
Obviously, I highlighted the MSOS and YOLO ETFs above, and for good reason. Since the next legalization event could happen in the U.S., companies within the country are a clear focus. The downside is that many of the U.S.-based cannabis companies are listed on the OTC. Therefore, those who use Robinhood or Webull aren’t able to gain exposure. So, in the interim, I think this is why we’re seeing Canadian names experience stronger momentum. You’ve got millions of traders who want to gain exposure to the industry and the only stocks accessible are NYSE and NASDAQ stocks, which just so happen to be mostly Canadian pot stocks.
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Needless to say, Harvest Health & Recreation is on the list even if Robinhood and Webull users can’t trade it. The bullish nature of this penny stock during 2020’s 4th quarter is hard to ignore. It’s also one of the top penny stocks held by the MSOS ETF if you’re wondering. Since the start of October through to this week, HRVSF stock has climbed from $1.02 to $2.98. Similar to Hexo, Harvest hasn’t only benefited from industry sentiment. The company has also executed on its own set of milestones and initiatives.
One of the key points of focus of traders has been the growth that Harvest experienced recently. In its last quarterly report revenue came in at $61.6 million, up 86% from the third quarter of 2019 and 11% sequentially. Adjusted EBITDA was $10.5 million, compared to $4.1 million in the second quarter of 2020. Also, as of September 30th, Harvest owned, operated, or managed 37 retail locations in seven states. This included 15 open dispensaries in Arizona. With this type of growth, will HRVSF be one of the marijuana stocks on your watch list this year?
Sundial Growers Inc.
Love it or hate it, Sundial Growers continues to be one of the top marijuana stocks to watch. Not only has volume remained high, but the SNDL stock price has also made a significant move over the last 2 weeks. Since the end of 2020, shares have climbed from around $0.48 to highs this week of $0.79. Much of the uncertainty, concern, skepticism, or whatever you’d label it, has stemmed from the company’s debt structure. Rather, how the company has handled communications with the market.
For instance, Sundial announced that it “eliminated” certain senior secured convertible notes. In actuality, the holder of Sundial senior secured second lien convertible notes simply converted the notes. While this cut $73.2 million in debt, the remaining indebtedness remained above $70 million under its senior secured credit facility. Meanwhile, the company had been raising more money – $117 million over the six months leading up to the end of November.
Regardless of this, traders continue to flock to the marijuana penny stock as hundreds of millions of shares exchange hands, daily. This week, the company announced the launch of premium concentrate products under its Top Leaf Brand, which was well-received by the market during the first half of the Monday session.
“We made a strategic decision to produce these premium products based on demand for solventless, flavorful, pure, and potent cannabis concentrates from a growing group of consumers,” said Andrew Stordeur, President and Chief Operating Officer of Sundial. The biggest question right now is can this momentum continue even as Sundial announces more financing rounds? An SEC filing this week showed that the company looks to possibly raise another $50 million.
Is It Time To Buy Marijuana Penny Stocks?
Considering the current regulatory and legislative activity, this could be one of the industries to pay attention to in 2021. Whatever the case might be with the outcome of the MORE Act vote, there are still new states coming online this year. What’s more, is that many of these smaller cannabis companies are clearly demonstrating stronger growth quarter over quarter and year over year. With this in mind, where do you stand on the subject? Leave a comment below.
