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Buds & Duds: Cannabis stocks fall for third straight day on industry gloom

Investors weighing in on Canopy Growth’s new CEO are taking a cautious stance in the face of challenges facing the firm and the broader sector

cannabis CBD
Neptune Wellness has bucked the downward trend by catching the investment community’s eye by reducing its client concentration risk and diversifying its customer base

Beleaguered cannabis stocks fell for a third straight day Wednesday as general pessimism smoked the industry, which is beset with weak quarterly earnings, cash problems and bad publicity over teen vaping.

One out of every seven 12th grader surveyed this year in the United States said they vaped marijuana products in the last 30 days, according to a widely cited article published in the peer-reviewed Journal of the American Medical Association (JAMA).

The North American Marijuana Index, which tracks the top cannabis stocks in the US and Canada, fell over 1% to 111.67 points. Elsewhere, the Horizons Marijuana Life Sciences Index ETF dropped 1.6% to $8.89, while the OTCQX Cannabis index fell 1.6% to 411.13 points.

Duds

The slower-than-expected development of the cannabis market has created a cash crunch and companies have been reining in costs.

Canopy Growth Corp (NYSE:CGC) (TSE:WEED) which had earlier climbed on the back of excitement created by the news that current CEO Mark Zekulin will step down to make way for Constellation Brands Inc (NYSE:STZ) CFO David Klein gave back most of its gains. Investors weighing in on Canopy Growth’s new CEO took a more cautious stance in the face of continuing challenges facing the company and the broader sector.

Canopy Growth stock fell 1.6% to $20.32.

Aurora Cannabis Inc (NYSE:ACB) (TSE:ACB) was reeling for a second straight day after Gordon Johnson of GLJ Research initiated coverage on Tuesday with a "sell" rating. He argued that "ACB's equity holds no value," and predicted that the cannabis grower will become “utterly worthless by the end of 2021.” He assigned a two-year price target of $0, shocking industry watchers.

Aurora Cannabis stock fell over 5.5% to $2.22 in New York and was down 4.8% to $2.93 in Toronto.

Buds

Trulieve Cannabis Corp (CSE:TRUL) (OTCMKTS:TCNNF), a vertically integrated seed-to-sale company, bucked the general downward trend after it was added to the OTCQX Cannabis Index. "This is the latest milestone in the growth of Trulieve," said CEO Kim Rivers. "Becoming a part of the OTCQX cannabis index will bring a focus on our business and operations as we expand and evolve." Trulieve Cannabis is the first and largest fully licensed medical cannabis company in Florida.

Shares in Trulieve Cannabis were up 1% to $13.80 in Toronto, and climbed 2% to $10.61 on the OTC Markets.

Neptune Wellness Solutions Inc (NASDAQ:NEPT) (TSE:NEPT) climbed in the US after it caught the investment community’s eye for reducing its client concentration risk and diversifying its customer base. The company which is involved in the extraction, purification, and formulation of cannabinoids, recently revealed it amended its processing agreement with Canopy Growth. The companies have agreed that from June 30, 2020 volume and pricing will be negotiated between the two parties based on market conditions, according to a statement.

As a result of the revised terms, Neptune said it expects to reduce its client concentration risk and diversify its customer base.

Shares in Neptune Wellness was up 1.7% at US$$3.53 on the tech-laden Nasdaq.

Contact the author Uttara Choudhury at [email protected]

Follow her on Twitter: @UttaraProactive 

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