Recent developments underscore the turbulent scenario investors are grappling with in the cannabis sphere, shedding light on the cannabis stocks to sell. While the U.S Drug Enforcement Administration mulls over changing marijuana’s Schedule 1 status and the Health and Human Services leans towards relaxing federal restrictions, a sliver of hope emerges. In that scenario, it becomes imperative for investors to hitch their rides with solid stocks in the cannabis realm.
Furthermore, environmental considerations complicate matters, as cannabis cultivation and processing pose challenges related to resource consumption, particularly water and energy. Amid this intricate regulatory landscape, investors must navigate heightened risks. While the cannabis sector promises long-term growth potential, caution is warranted. Here are three stocks ripe for selling in February to mitigate potential losses amidst the industry’s uncertainties.
Canopy Growth (CGC)
Canopy Growth (NASDAQ:CGC), once a luminary in the cannabis industry, is now overshadowed by the specter of bankruptcy. Its descent has been rapid, with shares tumbling 82.29% over the last year, pushing it into the realm of penny stocks. This downturn is further emphasized by its recent decision to sell its headquarters to Hershey (NYSE:HSY) for $53 million, which speaks volumes about its dire financial positioning.
Financially, the picture remains bleak, as evidenced by a third-quarter report showing GAAP earnings per share of negative CA$2.78 and a revenue drop of 7.5% year-over-year to CA$78.51 million. Additionally, the outlook for Canopy Growth is concerning, with forward revenue growth at negative 16.01%, sharply diverging from the sector median of 8.64%.
Mirroring this grim trajectory, TipRanks analysts assign Canopy a moderate sell rating and project a 5% downside. This consensus leaves little room for optimism, anchoring the company’s future to a significant yet uncertain legal pivot in the U.S. cannabis landscape.
Aurora Cannabis (ACB)
Aurora Cannabis (NASDAQ:ACB), a licensed cannabis producer, has been navigating turbulent waters. In 2020, the company became the target of a class-action lawsuit from investors, who accused it of issuing misleading statements concerning its financial health. This legal quagmire underscores deeper financial woes as Aurora grapples with a hefty debt load that constricts its operational flexibility and growth ambitions.
Financially, the company’s fiscal predicament is further highlighted by a year-over-year share price nosedive of 52.79% and an alarming revenue decline of 8.28%. The financial metrics paint a grim picture, with Aurora’s EBIT margin for the trailing twelve months plummeting to negative 109.63%, starkly underperforming the sector’s median of negative 0.26%.
Furthermore, this steep disparity signals profound operational challenges and inefficiencies that the company must address. Adding to the bleak outlook, TipRanks analysts have assigned Aurora a moderate sell rating, anticipating a further downside potential of 42%. Aurora’s recovery path appears fraught with significant hurdles ahead.
MedMen (OTCMKTS:MMNFF), once heralded as a pioneer in the U.S. marijuana retail landscape, now navigates through tumultuous financial terrain, overshadowed by previous controversies and mismanagement. The road to recovery appears elusive for the former industry pioneer.
In the smoke-filled aftermath of the controversy, MedMen’s financial struggles persist. The strategic presence in California and key markets offers little solace as the echoes of past CEO missteps and supplier scandals reverberate. With cash burn mounting, the company reluctantly sheds assets and seeks funding in less-than-ideal circumstances, navigating a dangerous path to redemption. Furthermore, the fallout from these challenges is reflected in the company’s stock performance, with shares plummeting to an alarming 99.99% in the past year. This decline is compounded by a disheartening 17.45% drop in year-over-year revenue, starkly contrasting with the sector’s median growth of 6.27%. Additionally, the negative net income margin of 112.21% underscores the profound financial distress engulfing MedMen.
On the date of publication, Muslim Farooque 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