One of the largest factors for marijuana stocks to survive the coronavirus pandemic is how much free cash they have on hand. With so many large pot stocks in the industry, the ones with the most free cash are the ones who can survive the longest through economic hardships. The cannabis industry is extremely resilient to high rates of volatility, but certain events can test just how well certain marijuana stocks will survive. For the purpose of this article, it’s worth looking at the two largest cannabis stocks in the industry to see what they are doing to combat pandemic related troubles.
Cannabis investors should continue to be critical of companies by researching them, and deducing which ones have the most inherent value. But, in a time like this, it is difficult to just use numbers to deduce what kind of future price action a pot stock will see. In addition to this, it seems as though the largest cannabis stocks tend to be the most forward-facing. Because of this, they can often serve as a great way to extrapolate data about the rest of the industry. Although these two major pot stocks may not be pot stocks to watch on their own, they present cannabis investors with an interesting view of the market overall. Because of this, these two companies are definitely worth considering in terms of finding another pot stock to watch.
The Biggest Pot Stock In the Industry
Canopy Growth Corp. (CGC Stock Report) is without a doubt, the largest pot stock in the industry. The company has remained that way for quite some time now, and sits as a marker for what is happening throughout the cannabis market. Although Canopy has definitely seen better days, the company is working hard to try and turn its business around. It recently announced that in order to cut costs, it would be laying off almost 500 employees. In addition to this, it announced that it would also be shutting production at two large greenhouse facilities.
The goal with this is to continue saving money, as Canopy’s balance sheet has not been pleasing to investors. The company has reported just north of CA$1.5 billion on hand which is about CA$1 billion less than it had at the same time last year. Although that is a large amount of free cash, the fact that it has declined so quickly is undoubtedly concerning. But, as the figurehead of the cannabis industry, it looks as though Canopy Growth needs to work out the kinks in order to stay at the top of the cannabis market.
The Number Two Amongst Pot Stocks
Cronos Group Inc. (CRON Stock Report) is another one of the major cannabis stocks. The company has also had quite a rough past twelve months with a lot of volatility in its pricing. In its most recent report released on March 30th, the company stated that its reevaluation resulted in it showing a profit for the first time. This is big news despite the profit only being calculated off of a reevaluation. It shows that the company is working hard to try and turn its business model around similar to Canopy.
The company also stated that it has as much as $1.2 billion in free cash which is quite significant, and should help it to weather this current pandemic. In addition, the company only spent around $130 million in its operations during the 2019 year, which means that this amount of free cash is more than enough to cover any spending for 2020. But, Cronos Group still has quite a long way to go before it can fully be deemed a pot stock to watch. Until that time, the company should be watched as a marker for what is occurring in the rest of the industry.
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