2 Canadian Marijuana Stocks to Avoid

Things just keep getting uglier for cannabis stocks. Following a brief uplift, CannTrust Holdings (TSX:TRST)(NYSE:CTST) resumed its tumble on news that Health Canada had found even more unlicensed grow sites. CannTrust shares have fallen about 56% since the scandal began, while other marijuana stocks are being hit hard as well, whether due to regulatory concerns or growing losses.

In the midst of this environment, there are some glimmers of hope. Aphria, for example, recently delivered a quarterly report that showed positive net and operating profits. However, for many more marijuana stocks, the situation is looking grim. The following are two Canadian weed stocks that are in particularly tough spots right now.

Canopy Growth

Canopy Growth (TSX:WEED)(NYSE:CGC) has been absolutely tanking over the past few weeks, falling 17% since August 8. The highly pronounced recent losses follow months of milder losses: since March, the stock has fallen a whopping 44%.

One of the main reasons for Canopy’s tanking share price is the fact that it continues to lose money. In its most recent quarter, the company lost $1.28 billion, more than 13 times revenue for the quarter. Granted, most of this loss was from extinguished warrants: the operating loss was “just” $109 million. However, that $109 million operating loss is still way higher than the company’s reported revenue, which suggests that the company is having a hard time controlling expenses.

In more positive news, Canopy’s operating losses have been getting smaller; in the two quarters prior to the most recent one, they were $160 million and $150 million. These shrinking operating losses don’t seem to be convincing investors that profits are coming, however, as media coverage of Canopy’s recent earnings was overwhelmingly negative.


CannTrust has become the black sheep of the cannabis family, following a Health Canada regulatory scandal that damaged the company’s reputation.

To summarize the situation briefly:

A tipster alerted the regulatory body to the fact that the company had been growing marijuana in unlicensed rooms. After CannTrust conceded the report, Health Canada put a hold on 5,000 kg of the company’s product — meaning it can’t be sold. CannTrust then put a voluntary hold on another 7,500 kg of its own cannabis, dramatically limiting its ability to move product.

But that wasn’t the end of the story, as Health Canada said it had found even more unlicensed growing at CannTrust facilities. Now, the Ontario Cannabis Store is sending product back to the company, so even product that the company had previously sold isn’t moving.

There’s no telling where the CannTrust scandal will end. In the best-case scenario, the company misses out on most of its would-be revenue for this quarter and gets back to business as usual in the next one. In the worst-case scenario, the scandal turns into a wave of regulatory scrutiny affecting other marijuana companies and driving the industry to a standstill. Nobody knows for sure where it will end, but for now, CannTrust is one to avoid.

You might be missing out on one of the biggest opportunities in Canadian investing history…

Marijuana was legalized across Canada on October 17th, and a little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.

Besides making key partnerships with Facebook and Amazon, they’ve just made a game-changing deal with the Ontario government.

This is the company we think you should strongly consider having in your portfolio if you want to position yourself wisely for the coming marijuana boom.

Learn More About This TSX Stock Now

More reading

Fool contributor Andrew Button has no position in any of the stocks mentioned.

Source: The Fool
2 Canadian Marijuana Stocks to Avoid
The Fool

The Motley Fool
Contributor for investorsnews.ca
The Motley Fool is dedicated to helping the world invest — better. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, mutual funds, and premium investing services.

In all we do, we take a different approach.

We believe – and have proven over decades – that the individual investor can beat the market.

We believe that anyone can do it, even if they don’t have a lot of time or money to devote to investing.

We believe in a long-term outlook, helping people build wealth over time.

We believe that the person best positioned to take care of your financial future is you.

And we work tirelessly on behalf of our hundreds of thousands of members who are enjoying the opportunities that come with having enough money to do the things that matter to them.

While we are headquartered in Alexandria, Va., The Motley Fool advocates for the individual investor around the globe with offices in the UK, Australia, Canada, Singapore, and Germany.

Related posts