These 2 Cannabis Stocks Just Dropped in Price, but Are They a Buy?

It was a great week for cannabis stocks. Or at least, it would have been, but for Friday.

For some reason, investors took the opportunity to take their gains and go on a lot of cannabis stocks. Canopy Growth Corp.Aurora Cannabis Inc., and Hexo Corp. were just some of the stocks seeing losses that brought them back to Monday’s share prices.

Two other cannabis stocks that saw a loss were Cronos Group Inc.  (TSX:CRON)(NYSE:CRON) and Aphria Inc.  (TSX:APHA)(NYSE:APHA). These names have remained among many of the heavy hitters since legalization, but before you go ahead and buy more of the above stocks mentioned at these lower prices, let’s look at whether it’d be such a great idea.


It’s not hard to find overvalued cannabis stocks, but when it comes to Cronos, it’s pretty much a miracle that its share price has remained so high. This could be due to the recent closure of the deal between Cronos and Altria Group. The cigarette giant invested $1.8 billion in the cannabis company, in return getting a 45% stake in Cronos. This has given Cronos international reach overnight.

But international reach doesn’t mean much if you don’t have the product, and right now, Cronos only has the capacity to produce 120,000 kilograms. Hopefully it uses the Altria cash to expand, but it’s all “coulds” and “shoulds” until there are any real announcements.

So while the deal is great for Cronos, and will be for investors in the far-off future, right now it’s a waiting game. The stock is trading at about $26 per share at writing, but analysts are putting its fair value closer to $18. Ouch. So if it were me, I’d wait until the share price reaches that range before buying.


Another stock fuelled by recent news is Aphria Inc. This cannabis company recently received a full production license from Health Canada to expand its Aphria One production facility. The news means that Aphria can seriously ramp up production in the 800,000 square-foot facility to produce 115,000 kilograms per year.

While that’s good news, it hasn’t helped the recent drama surrounding Aphria. The company was accused by short sellers of purchasing shell companies in Latin America that proved to be “largely worthless,” selling those companies almost immediately at insane prices to pocket the cash.

Of course the company denies these claims, and a report has since been released stating that Aphria paid a reasonable amount for the Latin American cannabis companies. But it definitely shook the stock for months.

Now the company is seeing a rebound, but analysts are still placing the current share price at pretty near fair value. In this case, it’s a gamble to purchase it right now. While the news of a production license means Aphria could be back in the spot of lowest cost per gram of cannabis producer, it still needs to prove its worth to investors.

Bottom line

Both Cronos and Aphria have a ways to go to show investors that these companies deserve their money. At the end of this wild ride of a week, I’d be more interested in a few steadier options before heading down a potentially turbulent path like Cronos or Aphria.

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.

One grassroots Canadian company has already begun introducing this technology to the market – which is why legendary Canadian investor Iain Butler thinks they have a leg up on Amazon in this once-in-a-generation tech race.

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 Amy Legate-Wolfe has no position in any of the stocks mentioned.

Source: The Fool
These 2 Cannabis Stocks Just Dropped in Price, but Are They a Buy?
The Fool

The Motley Fool
Contributor for
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