Big Companies Invest In CBD Market
3 CBD Stocks on the Nasdaq
The North American marijuana market is skyrocketing from $ 9.2 billion in 2017 to $ 47.3 billion by 2027, according to Arcview Market Research. While the profit potential in the cannabis industry is huge, the market is considered particularly risky given that marijuana has been outright but officially legalized in the United States on a national level. Although most U.S.-based cannabis companies and many foreign ADRs trade over the counter, where there are less stringent listing requirements, some CBD companies are traded on the NASDAQ. Some investors prefer NASDAQ-listed stocks to other exchanges due to their higher liquidity and tighter spreads than OTC markets. As the cannabis industry has grown in recent years, the upgrade from an OTC market to a reputable US exchange has become an outstanding achievement for many emerging companies. NASDAQ was the first electronic exchange and has long been synonymous with technology and biotechnology. The NASDAQ cannabis companies reflect this, with the majority of them active in the biotech area of the industry.
Cannabis stocks sparked a frenzy among investors, fueled by developments including the legalization of recreational marijuana use in Canada, the adoption of legal use of medical and recreational marijuana in multiple states across the United States, key achievements from top players and major space investments by blue chip companies such as Constellation Brands Inc. (STZ). U.S. stocks in marijuana are hampered by laws that heavily tax the industry and restrict businesses’ access to traditional banking services. For this reason, the major cannabis companies are based overseas, including GW Pharmaceuticals, Canopy Growth, and Aurora Cannabis. Other headwinds that plague the industry in general include declining marijuana prices due to investments in production that rapidly increase supply.
Here is one of the best marijuana stocks sold on NASDAQ. This list includes companies with market capitalizations greater than $ 1 billion.
Cronos Group Inc. (CRON)
Market cap: $ 4.16 billion
YTD stock return: 110.1%
GW Pharmaceuticals PLC ADR (GWPH)
Market cap: $ 4.48 billion
YTD stock return: 50.9%
Arena Pharmaceuticals Inc. (ARNA)
Market cap: $ 2.4 billion
YTD stock return: 26%
Cronos Group is a geographically diverse and vertically integrated Toronto-based cannabis producer operating under the Health Canada Medical Cannabis Access Regulation and distributes globally.
The shares of the Cronos Group increased by 200% in 12 months and by over 122% in three months. The Cronos Group witnessed a jump in its shares in December on news from tobacco giant Altria Inc. (MO) a planned $ 1.8 billion investment for a 45% stake in the company. Another $ 4 billion investment from Corona maker Constellation helped boost investor confidence. The deal was seen as giving Cronos ample money to expand its operations, obtain licenses, as well as secure it a partner with experience in marketing global consumer brands. The stock plunged more than 6% on February 5 on a bearish note from GMP Securities, which downgraded its rating from buy to hold, “purely on valuation”.
Investors will be keeping an eye on how Cronos can expand into the US market and overseas, while increasing its penetration into the Canadian recreational space. Cronos is expected to increase YOY’s sales by nearly 450% next year.
GW Pharmaceuticals is a British biopharmaceutical company with a portfolio of CBD, including Sativex for the treatment of spasticity related to multiple sclerosis and cancer pain, and Epidiolex for the treatment of childhood epilepsy. Sativex is marketed in over a dozen countries outside the United States and has received regulatory approval in many other countries. Epidiolex has received FDA approval as a treatment for Dravet syndrome and Lennox-Gastaut syndrome, two forms of severe early-onset epilepsy with no good treatment options available.
While GWPH’s shares were up more than 50% on a quarterly basis, the stock experienced significant volatility alongside its peers in the cannabis industry. The stock has underperformed the market overall over the past three months, down 2.5% from the S&P 500’s loss of 0.6%.
In addition to GW’s two FDA-approved drugs, the company is also developing CBD Collections for autism spectrum disorders, schizophrenia and glioma. The company indicates that its proprietary platform for extracting and processing compounds from marijuana offers an edge over peers in developing treatments with various therapeutic uses. However, headwinds include competing products from companies like Zogenix, which could prove GW’s short-lived success. Sales are expected to increase by more than 900%.
Arena Pharmaceuticals, based in San Diego, is a biotech company engaged in the manufacture of medical marijuana drugs. Research and development around Arena’s APD371, an oral pain reliever drug for Crohn’s disease, is the primary focus of its CBD biotechnology initiatives. Its primary goal is to replace opioids, which are addictive and the leading cause of death from overdose. Unlike GW Pharmaceuticals, Arena dedicates only a portion of its pipeline of therapeutic cannabinoid-type drugs and CB agonists, while the other portion is composed of non-cannabinoid drugs. The company has multiple drugs in clinical trials, but only one on the market through a royalty deal, potentially making it a more speculative investment.
Arena’s shares are up more than 25% year-on-year, which represents a gain of 22.1% in 12 months and a return of more than 170% since its IPO in early 2016. In 2012, the FDA has approved Belviq (lorcaserin), a weight loss drug, which it subsequently sold to its Japanese partner for royalties on global sales.
The company’s sales and inventory growth will depend heavily on the future of its efforts to market drugs that treat conditions such as pulmonary arterial hypertension (PAH), various immune and inflammatory conditions, and Crohn’s disease.
While many market watchers continue to be wary of the high valuations of CBD flowers and Delta-8 THC companies, the opportunity for growth in the growing sector may justify the high valuations. According to a recent report from the Bank of Montreal, in a blue sky scenario where the United States and all 28 EU countries legalize the use of recreational and medical marijuana and Latin America has legalized medical use, the global market could reach $ 194 billion by 2025. Comparatively, Canadian medical and recreational markets are expected to generate only $ 5.9 billion. While the Canadian recreational market is picking up momentum and global medical marijuana remains in its early stages, US legalization of hemp and the potential to cancel CBD regulations also open the door to new opportunities for Canadian producers. Ultimately, cannabis stocks could represent a solid long-term play in a fast-growing industry, for investors who can bear the volatility.