Top Cannabis Stock 2019: Add This Pick to Your Watch List
Looking for a booming sector to invest in? Look no further than cannabis.
Legalization has been spreading across the country over the past several years. Eleven states and the District of Columbia have completely legalized marijuana for recreational purposes.
On top of that, 33 states have legalized marijuana for medical purposes.
The result? An industry now worth $10.4 billion.
Globally, the weed market is forecast to rise by more than 28% every year from 2019 to 2025, according to Meticulous Research. By 2025, given those growth expectations, the market is likely to be worth $75.6 billion.
That’s why we’re bringing you one of the top cannabis stocks to watch…
Lately, though, there’s been a lot of volatility in weed stocks.
So how do you weed out the winners from the losers? This stock below is a start…
The Top Cannabis Stock to Watch in Q4 2019
The top cannabis stock we’re watching right now is Cronos Group (Nasdaq: CRON).
Cronos currently sells at a deep discount. It’s dropped more than 50% since reaching its high this winter.
As investors may know, the Centers for Disease Control and Prevention is investigating a spate of acute lung illnesses that seem to be related to vaping products. At one point, it had registered 450 cases spread over 33 states.
That may have affected the share price of a stock whose products are related to smoking and vaping.
However, it could also be an overreaction. We believe these concerns are misplaced when it comes to the products of Cronos.
The problematic vaping seems to be related to home-produced black market products. The majority of cases are being found in states where pot remains illegal. Hospitalized patients have, in some cases, admitted that they used illegal THC e-liquids, purchased from vendors who were themselves illegal, to make the products.
So in short, Cronos has a problem with public perception. Perceptions are very difficult to control, but the drop in the share price has created bargain conditions for a good company. If you’re an investor who didn’t capitalize on the first wave of weed stock profits, that’s good news.
Cronos Has a Plan
The company has a strong strategic plan. It doesn’t want to have an offering of secondary shares, like many marijuana companies have had, because it dilutes shareholder equity.
Instead, management is forging partnerships with major players in the industry. In March 2019, it finalized a deal with leading cigarette maker Altria (NYSE: MO), in which Altria paid $1.8 billion in cash and obtained 45% of Cronos.
With the cash, Cronos’ management has the power to forge more strategic acquisitions and grow its market share versus competitors.
Altria offers strong support for Cronos’ marketing and an enhanced path to global brand expansion.
The company also doesn’t want to oversaturate the market with weed. Instead, it concentrates on market leadership in the cannabinoid (CBD) space.
You see, just being a weed producer can be risky. As more and more competition focuses on production, profit margins are likely to get very narrow. As an alternative, Cronos has a network of producers who specialize in CBD products, which have higher margins. These producers are contractors to Cronos.
This focus has increased profits and turned the bottom line from red to black.
In the first two quarters of the year, the company booked profits of $323 million and $187 million, respectively. That’s quite a change from 2018’s $14.6 million loss.
Revenues jumped 120% year over year in the most recent quarter.
Stock analysts forecast revenue of more than $60 million in 2019, or 283% yearly growth.
For more on cannabis investing, check out our recent Marijuana Stocks research. You can also sign up for our free e-letter below. It’s packed with investing insight.