Marijuana Stocks Not Getting Investors High Ahead Of Earnings

After growing like a weed last year, marijuana stocks have gone up in smoke so far in 2019.

Excusing the puns, it’s been a brutal couple of quarters for Canadian marijuana stocks. After last year’s surging interest in the nascent industry, investors’ expectations were impossibly high; as the reality of selling an easy-to-grow plant (it’s called “weed” for a reason!) in a heavily-regulated industry sunk in, traders have become increasingly disillusioned with the outlook for these firms, many of which have yet to reach profitability.

Source: TradingView, FOREX.com

That said, the potential market remains compelling and valuations for industry bellwethers are at 2-year lows, leading the investment bank Cantor Fitzgerald to come out bullish on the sector last week. One catalyst that could boost leading marijuana stocks as they report earnings this week is heavy short positioning, which could lead to classic “short squeeze” setups on better-than-expected results in the following firms:

  • Cronos (CRON) – 26% of float held short
  • Tilray (TLRY) – 38% of float held short
  • Aurora Cannabis (ACB) – 19% of float held short
  • Canopy Growth (CGC) – 25% of float held short

Below, we highlight some key factors to watch as each of these firms report earnings this week:

1) Cronos (CRON) – Narrower Loss, Miss on Revenues

While Cronos has a relatively small footprint compared to its peers, with minimal presence even in domestic provinces like Quebec and Alberta, it has benefitted from a massive $1.8B investment from Altria Group. The firm just reported -$0.02 in EPS, beating estimates of a -$0.03 loss, though revenues came in lighter than expected at $10.1M. Traders are nonplussed at first glance, with the stock trading down -3% in early trade today.

Given the firm’s small footprint and major corporate backer, CRON represents one of the highest upside plays in the sector moving forward, albeit with substantial risk as it tries to overcome rivals’ early mover advantages.

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