In this week’s Marijuana Market Update, I dive into a couple of cannabis stocks that a viewer wrote in about: Aurora Cannabis Inc. (Nasdaq: ACB) and Trulieve Cannabis Corp. (OTC: TCNNF).
William wrote me at Feedback@MoneyandMarkets.com and asked:
I am wondering if there are any cannabis stocks worth buying now. I was looking at Aurora Cannabis and Harvest Health. Are these a buy now as they have been hit hard?
William
William, thanks for your question.
Let’s take a closer look at these companies to get an answer.
Aurora Cannabis (Nasdaq: ACB) Analysis
First up is Aurora Cannabis, an all-encompassing company based in Edmonton, Alberta.
ACB sells dried cannabis, oil, capsules and topical kits to international consumers.
Aurora’s brands include:
- Aurora.
- Aurora Drift.
- San Rafael ’71.
- Daily Special.
- AltaVie.
- CanniMed.
- And Woodstock.
We’ll start with its Cannabis Power Rating:
ACB rates a “Neutral” 44 on my rating system, which compares all cannabis stocks to each other based on momentum and value.
It scores a 78 on value. Its price-to-sales ratio (P/S) of 1.73 is lower than the industry average of 1.98.
Aurora has a price-to-book value ratio (P/B) of 0.36, which is almost three times lower than the 1.05 industry average.
Aurora also has a negative price-to-earnings ratio (P/E). The company isn’t turning a profit yet.
ACB’S Bearish Momentum
On momentum, Aurora scores a “Bearish” 21, as the stock dropped almost 80% over the last 12 months.
You see some small spikes in February, March and May — when headlines reported potential cannabis legalization in the U.S.
The stock has moved up from its 52-week low set in June, but for the most part, it’s trading flat.
One potential benefit for Aurora is its foothold in Germany.
ACB Set to Benefit From Cannabis Legalization in Germany
The German government is on the verge of legalizing adult-use cannabis across the country.
Aurora already has a production facility there that supplies medical cannabis to the population.
If legalization passes, ACB can pivot to producing adult-use recreational cannabis and be one of the first in a market that’s valued at $12.6 billion!
Trulieve Cannabis Corp. (OTC: TCNNF) Analysis
William asked about Harvest Health and Recreation, but Trulieve bought that company for $2.1 billion last year.
The deal created one of the largest U.S. cannabis operators at the time.
This Florida-based multistate operator (MSO) is the largest medical cannabis producer in the Sunshine State.
It also operates dispensaries in:
- Pennsylvania.
- Arizona.
- California.
- Maryland.
- Massachusetts.
- West Virginia.
- And Connecticut.
Trulieve scores a “Bearish” 33 on my Cannabis Power Ratings system.
It scores a 61 on my value metric, with P/S and P/B ratios all even with cannabis production industry averages.
Like Aurora, Trulieve has a negative P/E, while the industry average is 21.7.
The company is moving into Georgia, and Trulieve CEO Kim Rivers told Yahoo Finance she’s “cautiously optimistic” about broader cannabis efforts at the federal level.
Let’s look at Trulieve’s momentum:
TCNNF Is Also Struggling
Much like Aurora, Trulieve’s stock price has taken a hit.
TCNNF is down more than 50% over the last 12 months!
Trulieve rallied from its July low but trades below its 50-day simple moving average.
Final Recommendations for ACB & TCNNF
Both companies are positioned for solid futures as Aurora picks up in Germany and Trulieve uses its Florida model to expand to other states.
Aurora has better value metrics than Trulieve, but Trulieve’s stock price has not dropped as fast as ACB’s.
Bottom line: Neither of these stocks is showing significant enough momentum to warrant a full-on buy right now.
I like the prospects of both companies, but I’m not sure that now is the time to start investing in them.
I hope that answers your question, William.
That’s all for me this week.
One more thing: Any questions? You can get Money & Markets swag by submitting a question for me, Adam O’Dell or Charles Sizemore that we’ll use in any of our videos. Just send us your questions and feedback.
Where to Find Us
Make sure you subscribe to our YouTube channel and get notified each and every time we post a new video.
We have a lot of great weekly video features on our channel, including:
Ask Us Anything — Adam, Charles and I answer your investing questions.
The Stock Power Podcast — Our weekly podcast where I show you the trends and analysis that move the market.
All these series are on our YouTube channel.
Also, you can follow me on Twitter (@InvestWithMattC), where I’ll give you even more insights, not just on the cannabis market. You can also check out my new Stock Power Daily series on the Money & Markets website. I give you a new stock every day that I expect to outperform the market based on our proprietary Stock Power Ratings system.
Safe trading,
Matt Clark, CMSA®
Research Analyst, Money & Markets
Matt Clark is the research analyst for Money & Markets. He’s the host of our podcast, The Stock Power Podcast, as well as the Marijuana Market Update. He’s also a certified Capital Markets and Securities Analyst through the Corporate Finance Institute. Before joining the team, he spent 25 years as an investigative journalist and editor — covering everything from politics to business.
