These Three Attractively Valued Marijuana Stocks are Currently Trading at a Fraction of Their Wall Street Consensus Price Targets
Investing in the cannabis sector over the past six months has been rough, to say the least. Make no bones about it, times have been tough but no trend lasts forever. All downtrends ultimately come to an end at some point and for the sake of investor sanity, we hope that time comes soon. Normally, at the end of a downswing, there will be a day consisting of a large sell-off in the morning followed by a reversal in the afternoon. This usually marks the culmination of the trend and signals to investors its time to pile in.
Most expected the sector to experience a fall season rally but the ‘vape crisis’ media scare threw a wrench in those plans. Stocks were already on the rebound as short covering was underway before the embellished stories which omitted important facts rained on our parade. It is highly likely that any investigation into the vaping health matter will find that all vaping related health problems stemmed from illegal black market vapes and not legally produced products. Raymond James analyst Rahul Sarugaser believes this too and foresees the vaping issue blowing over allowing pot stocks to rebound soon.
Taking a look at industry bellwethers Canopy Growth (TSX: WEED) (NYSE: CGC) and Aurora Cannabis (TSX: ACB) (NYSE: ACB) trading activity today we see some positive developments. Both stocks sold off heavily this morning before rebounding around lunchtime and are now trading up 3% and 4% respectively. Top U.S. multi-state operators such as Curaleaf (CSE: CURA) (OTCQX: CURLF) and Trulieve (CSE: TRUL) (OTCQX: TCNNF) are having a big turnaround day as well with both stocks up over 8%. Many other top Canadian licensed producers (LP) are now up nicely on the day as well. Canopy and Aurora are stocks that lead the sector and today’s price action is promising. External factors such as weak earnings, negative industry news and regulatory issues can all mess with technical analysis as we’ve seen over the past six months. Hopefully, the worst is behind us and the industry can move forward and continue its rapid growth.
Below we’ve identified three cannabis stocks that due to a beat-up market are trading well below their Wall Street consensus analyst price targets. Should the market rebound and these targets are reached, four-bagger ROIs become very realistic. During good times multi-bagger returns are the norm in the cannabis sector but to achieve big returns, investors must take big risks.
Aleafia Health (TSX: ALEF) (OTCQX: ALEAF) has a consensus analyst price target of $3 per share but is trading at just $0.87 as of today. According to Wall Street’s target, Aleafia currently offers investors nearly 250% in implied upside. Aleafia has made its name as a medically-oriented company that joins a range of different operations across the cannabis industry, including licensed cultivation, cannabis product innovation, and high-touch, high-value medical cannabis operations across Canada. Aleafia’s clinical relationships have value throughout the operational chain, keeping customers informed and trusting. Its growth has been two-tracked, with both organic revenue increase and M&A. Aleafia’s mergers and acquisitions such as Canabo and Emblem have made strategic sense and allowed for greater depth and growth. The company has just completed a 1.1 million-square-foot outdoor grow with an adjacent 2.6 million square feet that will allow the company to get more plants into its integrated business. Whether in its actual planting and harvesting or across its other units, Aleafia has a lot of surface area for further green bounty and market upside.
iAnthus Capital (CSE: IAN) (OTCQX: ITHUF) has a lot of exciting potential upside for investors, and a price target almost quadruple what it trades at currently. Where business happens and cannabis is at the dispensary level, that’s where consumers feed their senses with cannabis: the touch and of course the smell of cannabis products in their wide variety add to ever-deeper detail about each product and its specific benefits to the consumer. This company is focused on the United States and reports that it has close to 30 dispensaries already open in more than 10 states with the potential to open almost 20 more in the coming months. This multi-state operator (MSO) is looking for opportunities in markets with relatively low populations but relatively high cannabis use such as Nevada and Florida. It also has a hold in other parts of the East Coast and Southwest region including in New York and Florida. The Wall Street consensus estimate for iAnthus is $8.23 while the stock is currently trading today for just $1.94. iAnthus offers investors a potential return of 324% should the stock end up reaching this target.
Greenlane Holdings (NASDAQ: GNLN) is another dispensary-focused play with high potential for its NASDAQ listed shares, currently trading at just $3.42. According to Wall Street analysts, they believe the stock is worth $20.10 implying potential upside from current levels of 488%. The company is keeping both cannabis and tobacco accessories on shelves in over 11,000 retail locations in the U.S. and Canada. Those accessories or paraphernalia as they are more commonly referred to where cannabis is illegal are true tools of the trade and instruments of advantage for companies that innovate in product delivery. The company is not without its challenges. These include Greenlane’s many Chinese made products hanging as key variables in the value chain and leaving the company’s margins uncertain as the Trump-Xi trade war rocks its cargo. They might also find shipments stuck altogether. Then there is the issue of vaping as a new but possibly dubious means of cannabis administration, with the United States federal government looking at lung diseases tied to vaping. There is also recognition that as a means of consuming tobacco, vaping has taken in many young people who consider vaping to be outside the nicotine danger zone traditionally associated with cigarettes. Greenlane’s distribution of vape products can be an advantage or a point of risk exposure depending on which way the hazy winds blow. However, its relationships and network reaching the consumer level will always be of value, giving this company significant intrinsic value as well as upside potential.
As the cannabis industry continues its rapid expansion, companies like these three present buying opportunities for those who see the same potential as Wall Street analysts.
Move Over Curaleaf, There’s a New MSO in Town and it’s Set to Hit The Street This September
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Aleafia Health is a paid client of The Cannabis Investor.
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