2 Marijuana Stocks That Could Double by Year-End

Consider Aurora Cannabis Inc. (TSX:ACB)(NYSE:ACB) and another pot stock if you’re looking for big gains going into the second half.

| More on:

The marijuana market is hungover again, but if you’ve been following the nascent industry since the early pre-legalization era, you’d know that such times are among the best times to be a buyer.

The CannTrust Holdings fiasco has caused many investors to be wary of the entire sector as a whole lately. Nobody wants to lose their shirt on a whim due to some impossible-to-foresee isolated event.

While the odds of such a single disastrous event are significantly decreased with larger, better-known pot stocks, the well-established cannabis behemoths still trade as though they’re spoiled because of the one bad apple (CannTrust) that’s been wrongfully associated with them.

Without further ado, here are two top cannabis plays I’d buy on the dip.

Aurora Cannabis

Aurora Cannabis (TSX:ACB)(NYSE:ACB) had its fair share of controversy back in the pre-legalization era when management was going “nuts” with its fast and furious acquisition spree that was highly dilutive to shareholders.

While the moves were unideal for investors at the time, there were no signs of fraud, and the stock had taken a big hit to the chin to adjust for the untimely moves made by management.

Fast forward to today, and Aurora is proving its doubters wrong with astounding growth numbers, while expanding its low-cost production into foreign markets such as Denmark, Uruguay, and Portugal. The company expects to post over $100 million in net revenue, more than five times higher than the same quarter last year.

Add Aurora’s focus on lowering the cost per gram of marijuana into the equation, and you’ve got a company that’s positioned to take on the industry by storm.

Canopy Growth

Canopy Growth (TSX:WEED)(NYSE:CGC) has been leading the downward charge in the latest industry-wide pullback. The company delivered a one-two punch to the gut of investors with steeper losses and weaker margins.

Canopy appears to be headed in the wrong direction and is moving further away from the path to profitability. With no Bruce Linton at the helm to shoot down profitability concerns, investors have been ditching the stock to the curb over near-term results that I believe are nothing more than a blip in the grander scheme of things, rather than a start of a trend that’ll lead to numbers that’ll fall deeper into the red.

You see, Canopy is spending cash at a rampant rate to finance facilities that have yet to come online. As you’d expect, such expenses would stand to erode margins, but all investors seem to care about is getting closer to the green, even if it’s at the cost of long-term growth.

Management emphasized that its margins will be back in the 40% range by the conclusion of fiscal 2020. However, most investors either don’t appear to be willing to wait it out or are not buying into management’s commentary, which I don’t think is overly optimistic whatsoever.

Although Linton’s firing (the Linton hangover) will act as an overhang on Canopy stock, I think there’s a highly favourable risk/reward trade-off for those willing to go against the grain.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has no position in any of the stocks mentioned.

More on Cannabis Stocks

Cannabis business and marijuana industry concept as the shadow of a dollar sign on a group of leaves
Cannabis Stocks

Should You Buy Canopy Growth Stock or Green Thumb Stock Today?

Let's dive into two cannabis giants, and which one may be the better pick for long-term investors.

Read more »

Farmer smiles near cannabis crop
Cannabis Stocks

Could Aurora Cannabis Stock Finally Recover by Year-End?

Down 99% from all-time highs, Aurora Cannabis stock is focused on improving profit margins and expanding sales of its medical…

Read more »

Farmer smiles near cannabis crop
Cannabis Stocks

Are Pot Stocks About to Surge Again? 

With pot stocks making big moves of late, many investors are now asking whether the cannabis sector is worth investing…

Read more »

Farmer smiles near cannabis crop
Cannabis Stocks

Can Pot Stocks Aurora Cannabis and Canopy Growth Bounce Back in Q4?

Down over 99% from all-time highs, Canadian pot stocks such as Aurora Cannabis and Canopy Growth remain high-risk bets.

Read more »

Worker tags plants at an industrial cannabis operation
Cannabis Stocks

Can Canopy Growth Stock Finally Recover in 2024?

Down 98% from all-time highs, Canopy Growth remains a high-risk investment in 2024 given its weak fundamentals.

Read more »

Tech Stocks

3 No-Brainer Stocks to Buy With $20 Right Now

These three stocks are easy buys for those who don't have all that much to spend, and want long-term growth…

Read more »

Pot stocks are a riskier investment
Cannabis Stocks

Slow Burn: Is Aurora Cannabis Finally a Good Buy in June?

One of the benefits of choosing from some of the most beaten-down market segments like cannabis is that even a…

Read more »

Caution, careful
Cannabis Stocks

I Wouldn’t Touch This TSX Stock With a 60-Foot Pole

I wouldn't touch Canopy Growth Corp (TSX:WEED) stock with a 60-foot pole.

Read more »