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Marijuana News Today
The marijuana news today shows us a positive reaction from a top Wall Street analyst, which speaks to a growing acceptance and interest in cannabis.
“While the potential uses of cannabinoids are vast, Cronos believes the key to successfully bringing cannabinoid-based products to market is in creating reliable, consistent and scalable production of a full spectrum of the roughly 100 cannabinoids, not just THC and CBD,” said Cowen Inc. (NASDAQ:COWN) analyst Vivien Azer.
“Together, Cronos can leverage Altria’s operational capabilities and expertise in order create value-added form factors while focusing on ingredient composition without reliance on a massive cultivation (farming) infrastructure.” (Source: “Wall Street’s top pot analyst loves Cronos deal for Altria: ‘Unique entry into cannabis‘,” CNBC, December 10, 2018.)
The alliance of “Marlboro” maker Altria Group Inc (NYSE:MO) and Cronos Group Inc (NASDAQ:CRON) is the first of such partnerships between “Big Tobacco” and marijuana companies. However, the Altira-Cronos deal is likely to not be the last.
The real strength behind this deal is that it will open the door for more multi-billion-dollar investments from tobacco companies in the future.
We saw the same thing play out in the alcohol industry, which has continued to grow its stake in marijuana products as study after study shows a decline in alcohol consumption after marijuana is legalized.
With the writing on the wall—marijuana legalization in 2019 will likely see at least one country consider joining Canada—companies like Altria are moving to secure their future against the green tide.
“Investing in Cronos Group as our exclusive partner in the emerging global cannabis category represents an exciting new growth opportunity for Altria,” said Altria CEO Howard Willard. “We believe that Cronos Group’s excellent management team has built capabilities necessary to compete globally, and we look forward to helping Cronos Group realize its significant growth potential.” (Source: Ibid.)
This opens up two options to investors on the pot stock market.
The first is, obviously, to follow the news and make quick buys of companies that are signalling a deal.
A report released several days ahead of the Altria-Cronos deal alerted us that a move was coming. If investors had bought in at that time, they would have seen their investment shoot up over 30% in five days. That’s not a bad return at all. (Source: “Altria in deal talks with cannabis company Cronos Group,” Reuters, December 3, 2018.)
The second option is to begin investing in Altria and marijuana-adjacent companies in order to reap the overflow benefit of this investment.
While likely to yield less of a return, these acquisitions are perhaps more stable, as the tobacco industry is not prone to wild swings. Pot, on the other hand, is still very new and exciting, which means volatility.
CRON Stock
The marijuana news today would not be complete without following up on the marijuana stock that stole the show last week, Cronos Group Inc.
While the market correction has been hurting many marijuana stocks, CRON stock has proven more resilient to the fall over recent weeks. This culminated in my recommendation of the stock for several weeks before the company’s Altria deal.
Which means that if you, dear reader, had invested in Cronos stock but a few short weeks ago, you would have gained an almost-40% return.
But moving forward, what’s the outlook like for Cronos?
CRON stock fell by about 1.6% in early-morning trading today, but has sustained a 36% rise over the past five days.
This is, of course, the result of the Altria investment, although we’re seeing now what is likely the end of the rush sparked by that deal.
Long term, however, Cronos stock still has a lot to offer. There’s a reason that Altria, which had long been rumored to be seeking a way into the marijuana market, selected Cronos.
The company’s fundamentals are solid and its financials are equally so, making it a very promising business to lead us into 2019.
ACB Stock
Back at it again, Aurora Cannabis Inc (NYSE:ACB) makes yet another acquisition, marking 2019 as the year of the buy for ACB stock.
This time, Mexican company Farmacias Magistrales is going to absorbed by Aurora. Farmacias recently became Mexico’s first federally licensed importer of raw materials containing tetrahydrocannabinol (THC). Farmacias plans to use imported THC and cannabidiol concentrates to produce various cannabis oil products for the medical market.
Aurora will gain access to the roughly 80,000 retail points and 500 pharmacies and hospitals across Mexico. (Source: “Aurora Cannabis to acquire Mexican company following partnership deal,” Global News, December 10, 2018.)
This is a good buy—depending on the price, of course, which was not available as of the writing of this article. However, I almost universally support global expansion in the marijuana trade; that is, after all, the future.
The only issue here being that Aurora Cannabis Inc has made a great many purchases this year and the company continues to flag below expectations. Some believe it overpaid several times, like in its buy of MedReleaf earlier in the year.
ACB stock climbed about one percent today in early-morning and has remained stagnant over the past five days.
While I’m still a little wary of the future of Aurora Cannabis Inc due to its repeated failures to spark growth in 2019, the company has all the tools and mindset to achieve gains. We’ll have to see if some of its buys will finally begin to pay off next year.
CRON and ACB Stock Performances
The CRON stock (black line) and ACB stock (blue line) performances from the past week are seen on the chart below:
Chart courtesy of StockCharts.com
Analyst Take
The marijuana news today is an overall good showing.
While the marijuana stock market largely remained unmoved today, that’s not necessarily a bad thing as the industry fights through this most recent correction.
The Altria-Cronos deal, meanwhile, continues to dominate the news and will hopefully encourage more outside investment to enter the market.
If we see more deals along those lines, that would bring about a swift and profitable end to the industry correction.
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