GWPH Stock Surges After Strong Financial Report, Could Double Wit…

GW Pharmaceuticals Financial Results

The medical marijuana industry is sometimes overlooked now that recreational marijuana has entered the scene in a big way. GW Pharmaceuticals PLC (NASDAQ:GWPH) is proving why that is a mistake.

This stock is up big following the release of GW Pharmaceuticals’ financial results, and it has the ability to double its value within a year. Before we get to my GWPH stock prediction, however, let’s take a look at the numbers.

Cash and cash equivalents were at $591.5 million this quarter, compared to $354.9 million the previous one. (Source: “GW Pharmaceuticals plc Reports Financial Results and Operational Progress for the Quarter Ended December 31, 2018,” GW Pharmaceuticals PLC, February 26, 2019.)

Revenue also jumped to $6.7 million, up from $4.0 million a year ago. Revenue nearly doubled from the same quarter the previous year, fueled by net product sales nearly tripling.

Net losses for the quarter jumped year-over-year, however, hitting $71.9 million compared to $61.8 million.

GWPH stock saw a double-digit rise on the day following the release of its quarterly report.

Much of these gains were helped along by the company’s flagship drug, “Epidiolex.” The cannabidiol-based prescription drug used to treat a rare form of epilepsy is a trailblazer in the medical marijuana market, with sales to match.

Epidiolex is the first ever plant-derived cannabinoid pharmaceutical approved by the U.S. Food and Drug Administration (FDA). Essentially, this makes it the only cannabis-related drug that is federally permitted to be prescribed in the U.S.

The drug yielded $4.7 million in sales in November and December, its launch period.

Prescription growth has also been trending upward, with January 2019 showing around 150% growth compared to December 2018. (Source: Ibid.)

To makes things better, GW is looking to push the drug in Europe as well. If the drug receives approval in several major European markets, then sales will increase in kind.

Epidiolex is driving the company’s success at this point, and for good reason. It is alone among large pharma companies going all-in on cannabis medication.

While there are other drugs under development by GW Pharmaceuticals, it is putting a lot of emphasis on Epidiolex, with another of its drugs, “Sativex,” being a cannabis-derived spray.

This places the company in a unique position that garners it a lot of recognition from the investing world. Moreover, the strong numbers helped drive a rush of investors toward GWPH stock.

The mixture of solid fundamentals alongside a unique value proposition leads us to why I believe that we could see GW Pharmaceuticals stock gain 100% within a year—but that comes with reservations.

GWPH Stock Prediction

The GW Pharmaceuticals financial results are very positive, as is the rollout of Epidiolex.

As a result, there’s a lot of potential for GWPH stock to continue to grow rapidly.

One of the next key steps for the company is for it to expand into European markets and other international markets. If that happens, then we’ll continue to see an increase in Epidiolex sales that will drive more strong financial reports, driving further share growth.

But there’s a catch here: GW is more a pharma company that focuses on medical marijuana than a medical marijuana company—that’s an important distinction.

Many medical marijuana companies have developed ways to sell directly to consumers hassle-free (many have online sign-up options) and are also not developing medical marijuana to treat specific conditions and diseases.

GW Pharmaceuticals, on the other hand, is very much focused on developing medical treatments that are then sold via prescription, necessitating the presence of regulators and doctors at every turn.

Much like other Big Pharma businesses, then, stock performance takes on a much different path compared to traditional marijuana companies.

The federal legalization of marijuana in the U.S., for instance, would likely not be a huge boon to GW, whereas many other pot stocks would be sent soaring.

Instead, the GWPH stock chart follows the traditional pharma process of drug development, trials, and approval by regulators.

This process presents many opportunities for stocks to rise, like when Epidiolex first received good results from its clinical trials and when it was approved by the FDA. But it is a fundamentally different process from other marijuana stocks, which rely on buzzworthy political headlines to drive share prices.

To see what I mean, take a look at the chart below:

Chart courtesy of StockCharts.com

Compared to Canopy Growth Corp (NYSE:CGC) over the past year, you can see that, while the two share similarities in terms of growth, they’ve diverged in several key areas.

In August 2018, for instance, when Canopy received another huge investment and marijuana stocks in general soared, GWPH stock received a much more modest boost.

And as can be seen above, the younger and nimbler Canopy Growth stock saw higher growth over the past year. The same goes for many of the top-performing marijuana stocks.

But that gap has since closed.

Chart courtesy of StockCharts.com

GWPH stock has had a very good start to 2019, and has even overtaken CGC stock with its latest surge.

Its rapid growth to start 2019 alongside its growing sales of Epidiolex make me believe that we could see 100% growth within the next 12 months.

There is a catch, however. The pharma business is a fickle one that, unlike the marijuana business more broadly, I’m less certain of.

For instance, I know that marijuana sales will increase and legalization will spread as the industry matures. Those are certainties (or about as near to certainties as you can get).

Pharma, on the other hand, is fraught with uncertainties. Delays, regulations, an inability to follow up with another drug, direct competitors fighting over a very specific and small market etc., can all have big impacts on the future of GWPH stock.

That isn’t to say that marijuana stocks are invulnerable, but that they are in a more stable position in the long term compared to GW.

But those problems are likely to occur years from now—if they occur at all.

For the next little while, there’s not a whole lot holding GW Pharmaceuticals back from being a worldwide leader in prescription marijuana medicine.

If it can stake its claim to that title and enter more markets with its treatments, then I foresee GW Pharmaceuticals stock being one of the better picks in the coming years.

Analyst Take

My GWPH stock prediction has the company up big by the end of 2019—with the ability to gain 100% within 12 months.

But I wouldn’t characterize GW as a home run; there’s a lot of uncertainty around it. Like with all companies in the pharma space, there are a lot of variables that  traditional marijuana stocks simply need not contend with.

But with that risk comes the opportunity for great reward. For those looking to make big gains quickly and who don’t mind a little bit of risk, GW Pharmaceuticals stock could be worth a look.