The Cannabis Sector Pull Back Could Be An Opportunity
In trading, on February 18th many top marijuana stocks continued to see lower prices in the market. This recent correction has left the cannabis sector trading near the same levels it started in February. Since in February most leading pot stocks saw new highs in the market this pullback has taken substantial gains from investors. In reality, this recent pullback could be a chance for investors to add to existing positions or start new ones at lower market value. When considering investing in cannabis stocks there are a few things investors need to know.
For one the cannabis sector is known to be one of the more volatile in the stock market. Current activity in February is a prime example of that market volatility. After reaching new highs in the market pot stocks are reassessing gains for the month. This could be a consolidation period before marijuana stocks continue to climb in the market. In reality, many day traders and swing traders take advantage of market fluctuations and profit from the price swings. As the cannabis sector has lost ground for a few days this could be a buying opportunity for cannabis investors.
At the present time, many investors are looking at cannabis stocks for their long-term potential in the market. As it stands many analysts are predicting cannabis sales will more than double globally in the next five years. This rapid growth is giving the cannabis market long-term appeal to investors. But investing in leading MSOs for long holds becomes difficult with the sector’s volatility. For this reason, many investors are looking for other areas to start positions in that still have exposure to the cannabis industry.
Other Areas Of The Marijuana Industry
One area of the cannabis sector that has shown more market stability is ancillary marijuana stocks. In detail, these are companies that support the cannabis industry but do not actually deal with the cannabis plant. In 2020 companies like Innovative Industrial Properties, Inc. (NYSE: IIPR) have become some of the top-performing cannabis stocks on the market. IIP is a REIT that focuses on buying and leasing cannabis facilities to licensed cannabis companies. Actually, IIPR stock is also a good long-term option because of the dividend it provides to shareholders.
Another area of the cannabis sector that’s often overlooked is the medicinal and CBD extraction companies. According to New Frontier Data, this part of the industry is expected to grow rapidly at a projected growth rate of 19% CARG to $16.3 billion by 2025. Representing a large portion of the $41.5 billion projected for the U.S. legal cannabis market. With this in mind let’s take a look at 2 leading cannabis stocks with future potential for the long-term.
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Marijuana Stocks To Watch:
- The Scotts Miracle-Gro Company (NYSE: SMG)
- GW Pharmaceuticals plc (NASDAQ: GWPH)
The Scotts Miracle-Gro Company is one of the world’s leading marketers of branded consumer lawn and gardening products. Through its wholly-owned subsidiary, Hawthorne Gardening Scott’s is also a leader in hydroponic and indoor growing products. At the present time with approximately $4.1 billion in sales, the company is among the most recognized brands in the industry. On February 3rd Scotts announced record Q1 fiscal 2021 results with U.S. consumer sales increasing 147%. Additionally, Hawthorne sales are up 71% and companywide sales increased 105% to $748.6 million. In this number, Hawthorne’s first-quarter sales were $309.4 million due to strong demand for indoor growing equipment and supplies.
Essentially, Scott’s gives investors exposure to two different parts of the agriculture business. In addition, Scott’s also provides an annual dividend of $2.48 per share. As the company reports its first-ever profit for a fiscal first-quarter it could be time to add SMG stock to your watchlist for a possible long hold.
SMG stock is up 16.35% year-to-date with a high of $250.00 on February 3rd. Currently, the stock closed at $231.68 on February 18th. At the present time, analysts at CNN Business are giving SMG stock a 12-month average price target of $270.00. In essence, this would be a 16.54% increase from current levels. As things progress with cannabis federal reform Scott’s could be a company that benefits from further regulation changes. With this in mind, SMG stock is a top cannabis stock for possible long-term investments.
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GW Pharmaceuticals plc
GW Pharmaceuticals plc is a biopharmaceutical company focused on discovering, developing, and commercializing novel therapeutics from its cannabinoid product platform. The company has done this in a broad range of disease areas. At the present time, the company’s lead product Epidiolex is being used in the U.S. for the treatment of seizures. In general, the drug is in use for treatment in patients with Lennox-Gastaut syndrome, Dravet syndrome, or tuberous sclerosis complex. Currently, Epidiolex is one of the first cannabis-based drugs to gain FDA approval in the U.S. and also received approval from the European Union.
On February 3rd GW Pharms announced an agreement for Jazz Pharmaceuticals plc (NASDAQ: JAZZ) to acquire GW Pharms for a total consideration of $7.2 billion. In detail, this is a purchase price of $220 a share with $200 in the cash and $20 in Jazz ordinary shares. This transaction is expected to close in the second quarter of 2021. In essence, this shows big pharma moving into medicinal cannabis and could be a sign of larger companies entering the industry.
GWPH stock is up 84.56% from the start of 2021 with a high of $217.50 on February 3rd. On February 18th SMG stock closed at $212.92 and could future potential this year. With GW Pharm beating revenue expectations for Q4 2020 it could continue to see more revenue. At the present time, analysts at TipRanks are giving GWPH stock a 12-month average price target of $217.13. In reality, this is only a 1.98% increase from its current levels. But with more cannabinoid medicine in the pipeline, this could be an option for medicinal cannabis stock for the long hold.
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