Marijuana stocks were once a hot topic in the financial world, as more and more states in the US have legalized cannabis for both medicinal and recreational use.
The total addressable market for the marijuana industry is enormous, with some estimates suggesting it could reach more than $200 billion by 2030.
However, there are also a number of risks and uncertainties associated with investing in this sector.
In terms of federal legalization, there has been a lot of speculation about when or if it will happen.
Although there is growing support for legalization, there are still a number of obstacles that need to be overcome.
Despite these challenges, there is no doubt that the marijuana industry is poised for significant growth in the years ahead.
Marijuana Stocks Industry Risks
With any investment, there are always risks associated and marijuana stocks are no different.
For example, marijuana is still illegal under federal law, which means that companies operating in the industry can face significant legal and regulatory challenges.
In addition, there are concerns about the potential impact of legalization on public health and safety, which has led some lawmakers to take a step back on progress.
One of the biggest risks is that federal legalization is stalled for years, or worse never happens. Another risk is a potential repeat of the boom and bust cycle that occurred in 2017 and 2018.
During this period, many marijuana stocks saw their prices soar to unprecedented levels, driven by a combination of hype and speculation.
When the bubble eventually burst, many of these stocks lost significant value, with a majority being down more than 95% from their all time highs.
While the future for the marijuana industry is somewhat bright, the reality is that over 90% of the companies will never become profitable and a larger majority will face bankruptcy risks.
Below, we will present the 5 Marijuana Stocks to Sell in 2023!
5 Marijuana Stocks to Sell in 2023
1. Aurora Cannabis (NASDAQ: ACB)
- Ticker: ACB
- Dividend Yield: N/A
- Market Cap: $208.46 Million
Aurora Cannabis Inc. has been struggling with profitability and has been forced to lay off employees and scale back its operations.
The company has also faced criticism for its high level of debt, which has limited its ability to invest in growth opportunities.
Furthermore, the company saw its 2022 revenue decline nearly 10% year-over-year and 2023 forecasts are projected to be negative.
Aurora Cannabis is a money losing machine, therefore investors should proceed with caution and consider selling in 2023.
2. Canopy Growth Corporation (NASDAQ: CGC)
- Ticker: CGC
- Dividend Yield: N/A
- Market Cap: $630.41 Million
Canopy Growth Corporation has also struggled and saw declining revenues in 2022.
The company saw total net revenue for fiscal 2022 of $520 Million, representing a decline of 5% year-over-year. Moreover, they saw a negative gross profit of $193 Million.
While the CEO has highlighted a focus on profitability in fiscal 2023, the company is currently battling with a slowing economy and higher interest rates. Therefore investors should consider selling Canopy Growth stock in 2023.
3. Cronos Group (NASDAQ: CRON)
- Ticker: CRON
- Dividend Yield: N/A
- Market Cap: $716.11 Million
Cronos Group is a cannabis and cannabinoid company headquartered in Toronto, Ontario, Canada.
Some of their notable brands include Spinach, Peace Naturals, and Lord Jones.
The company saw a meteoric rise in 2019 on the back of low interest rates and industry hype. Similar to Aurora Cannabis and Canopy Growth, the company struggles with profitability.
What separates Cronos Group from the others is the way the company manages their capital. They have a strong balance sheet with approximately $877 million in cash and only $3 Million in long term debt.
However, in a slowing economy investors are looking the other way from unprofitable companies. While the future is bright for Cronos Group with the potential for profitability, investors might want to steer clear until current macro conditions in the economy subside.
4. Tilray Brands (NASDAQ: TLRY)
- Ticker: TLRY
- Dividend Yield: N/A
- Market Cap: $1.47 Billion
Tilray Inc. is an American multinational cannabis brand with operations in the United States, Canada, Australia, New Zealand, and Latin America.
Similar to Aurora Cannabis and Canopy Growth, the company has also struggled with profitability and declining revenue growth.
In April 2023, they announced their acquisition of HEXO Corporation for $56 Million USD. However, this acquisition won’t be accretive to their plan to reach profitability.
With the company continuing to loose hundreds of millions of dollars per quarter, share dilution is likely to continue to fund acquisitions and future growth.
While some might speculate a promising future for Tilray, that gamble might not end up panning out.
5. SNDL (NASDAQ: SNDL)
- Ticker: SNDL
- Dividend Yield: N/A
- Market Cap: $405.75 Million
SNDL, formerly Sundial Growers is one of Canada’s largest cannabis retailers.
Some of its notable cannabis brands include Value Buds, Spirit Leaf, Top Leaf, Contraband, and Sundial.
The company has struggled tremendously with profitability, and since had a complete overhaul of the business.
This includes the acquisitions of Valens for $138 million and Alcanna for $255 million, respectively.
While SNDL forecasts revenue growth for 2023, there is not distinct plan to reach profitability anytime soon.
Therefore, investors should proceed with caution and sell Sundial until its profitability plans are more clear.
Investing in Marijuana Stocks: Final Takeaway
As the marijuana industry continues to grow and evolve, it is important for investors to carefully consider if marijuana stocks align with their investment goals.
The five marijuana stocks highlighted in this article have all faced significant challenges in recent years, including struggles with profitability, high levels of debt, and limited growth opportunities.
Over the past 3 years, institutional investors have cut their stakes significantly in the marijuana industry due to the regulatory risks associated with the sector.
While there is potential for some of these companies to turn things around, investors should approach these stocks with caution.
You should also consider selling if they do not see significant improvements in financial metrics such as revenue growth, margins, and profitability (positive net income).
As always, investors should always conduct their own research and consult with a financial advisor before making any investment decisions.
Disclosure: The author holds no position mentioned in this article. Freedom Stocks has a disclosure policy.
Related Articles
