Marijuana stocks continue to confound in 2018, despite a slew of positive catalyst events incorrectly predicted to turn around the market’s fortunes. While the political winds shift in the U.S. and Canada prepares for legalization come the end of summer, weed stocks struggle to find a semblance of balance, let alone aim to reach their heights of late last year.
And yet, as the veil lifts from an oversaturated market, and certain companies are revealed to be worth less than the numbers may show, analysts and media types continue to pump these stocks in search of headlines. Here are three overvalued marijuana stocks that analysts love.
GW Pharmaceuticals, plc
Analysts, insiders, and media pundits alike began fawning over GW Pharmaceuticals, plc (NASDAQ:GWPH) late last week when a Food and Drug Administration panel gave unanimous approval to the company’s drug Epidiolex, all but guaranteeing full approval from the FDA by this summer. Targeted at some of the most severe types of childhood epilepsy, Dravet and Lennox Gastaut syndromes, Epidiolex is pharmaceutical-grade cannabidiol (CBD oil) —and with an estimated cost of $25,000 per year, it comes with a “big pharma” price tag too.
Cannabis stock investors took their cue from the media and hailed the drug as marijuana’s second coming, dubiously thinking it the catalyst towards the rescheduling of marijuana or the allied front set to break the market’s volatility. In the days following the drug’s approval marijuana stock investors sent GW Pharmaceuticals share prices soaring.
Of course, as industrial-hemp CBD oil is not only readily available from any number of online retailers and specialty shops without a prescription, but also for a whole host of ailments outside of childhood epilepsy, Epidiolex is neither groundbreaking nor particularly necessary from an economic viewpoint. And GW Pharmaceuticals may be aware of this, as according to a number of outlets such as Leafly and The Cannabist they have sent a legion of lobbyists to statehouses across the country in a so far failed effort to legislate themselves a monopoly over the CBD market.
Still, pot stock analysts and media pundits continue to push the company, with the most recent being New Cannabis Ventures Alan Brochstein noting that he spoke with company representatives who promised him they were doing nothing wrong. While nothing can be alleged here, it is worth noting that Brochstein holds a small stake in GW Pharmaceuticals.
Cronos Group Inc.
When Cronos Group Inc. (NASDAQ:CRON) became the first pure-play marijuana stock to trade on U.S. exchange this past February, analysts’ excitement overcame their market sensibilities. Keith Noonan of Motley Fool swooned that following the company’s 300 percent share price climb, “Cronos Group could be an appealing pure-play in the marijuana space.”
Pot stock investors were jubilant at the thought of cannabis joining the financial mainstream, sending Cronos shares skyrocketing up 31 percent in February following the announcement. Licensed Producers like Canopy Growth Corporation (TSX:WEED) and Aurora Cannabis Inc. (TSX:ACB) used the occasion to tease their own moves to the Nasdaq, sending their own shares upwards for a moment as well.
Although Cronos performed well for the better part of the first quarter, the Nasdaq news sent prices shooting up too far, too fast. For all of the surrounding excitement, the company is trading at 13 times its sales.
Still, Cronos is a cannabis stock that has become a media darling, and one that analysts cannot seem to shy away from these days. “My take is that Cronos and other Canadian marijuana stocks are set to enjoy strong gains in 2018 and over the next few years,” wrote Keith Speights of Motley Fool, the site itself never one to shy away from media spotlight. In the end, though, this marijuana stock is all fluff.
Canopy Growth Corporation
It is easy to see why Canada’s number one Licensed Producer Canopy Growth Corporation (TSX:WEED) is also the most talked about marijuana stock among media outlets and industry analysts. The cannabis sector itself seems to flow in the direction of this industry titan, with stock prices rising and falling on its back.
Of course, pot stock investors know that Canopy is the choice not only for market players and consumers but for many local governments in Canada as well. The cannabis titan has signed supply agreements with Quebec, New Brunswick, Prince Edward Island, and Newfoundland and Labrador, among others. On the surface, it is hard to see them as anything but undervalued.
Yet, as analyst Neil Maruoka of Canaccord Genuity noted when he reiterated his hold rating on the company after placing a 12-month target price of $26.50 on them, “While we continue to believe Canopy may well emerge as the industry leader once the rec market comes on line [sic] in Canada, we note that the company currently trades at 23.6x our two-year forward EBITDA forecast, at the high end of larger peers averaging 15.9x EV/EBITDA (2-year fwd).”
Still, analysts like Palwasha Saaim of Profit Confidential continue to push the myth that Canopy Growth is an undervalued marijuana stock and that investors have not yet missed the train, so to speak. “Canopy Growth is hands down the best marijuana bet out there. Given its recent price drop, Canopy Growth stock is a steal,” she wrote recently, too mesmerized by the company’s shine to see what is really under the hood.