Will Q4 Results Continue To Fuel Momentum In Marijuana ETF?

The marijuana industry is burning hot due to easing regulations on the once highly guarded drug, marijuana, for recreational and medical usage. In fact, Canada’s legalization of recreational cannabis among adults has spread strong optimism into the space. Additionally, a number of states in the United States joined the race of marijuana legalization. Congress, the White House, and U.S. regulators have also softened their stance on the drug’s legalization.

Against this backdrop, ETFMG Alternative Harvest ETF (MJ - Free Report) — the first and only pure ETF targeting the cannabis/marijuana industry — has gained 41.2% so far this year. Now, investors are keen to watch whether legalization is living up to the hype in the quarterly results of the cannabis stocks. Four of the largest cannabis producers in Canada — Aurora Cannabis, Canopy Growth (CGC  - Free Report), Cronos Group (CRON - Free Report) and Tilray (TLRY  - Free Report) — are expected to report results over the coming weeks. These stocks are the top four holdings in the fund’s basket with a combined 39.4% share.

Let’s dig deeper into the earnings picture of these companies, which will drive the performance of the marijuana ETF in the coming days:

Earnings Preview for These Stocks

Aurora Cannabis is expected to report results on Feb 11. Last month, the company provided revenue guidance in the range of $50-$55 million for the soon-to-be-reported second-quarter fiscal 2019, reflecting more than 327% growth from the year-ago quarter and in excess of 68% from the previous quarter.

Canopy Growth carries a Zacks Rank #3 and has an Earnings ESP of -11.63%, indicating lower chance of beating estimates this quarter. According to our methodology, a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3, when combined with a positive Earnings ESP increases our chances of predicting an earnings beat, while Zacks Rank #4 or 5 (Sell rated) stocks are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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