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Technology Are marijuana stocks expanding too quickly?

19:27  11 july  2018
19:27  11 july  2018 Source:   fool.com

Canada's Senate votes to legalize recreational marijuana

  Canada's Senate votes to legalize recreational marijuana Canada's Senate on Thursday voted to legalize recreational marijuana, clearing a major hurdle that puts the country on track to become the first Group of Seven nation to permit national use of the drug. The upper chamber Senate voted 56-30 in favor of the legislation but included amendments that the House of Commons will need to decide on before the law can be passed.While there is not yet a definite date for when marijuana will be available for sale, the Senate was one of the last significant obstacles standing in the way of legalization as a number of Conservative senators oppose the bill.

Home Marijuana Business News Are Marijuana Stocks Expanding Too Quickly ?. The marijuana industry is in its early-growth stages and many companies are staking out positions in various parts of the country — and the world.

In case you haven't noticed, marijuana stocks have been practically unstoppable over the past Unfortunately, the expectation of legalization is enticing Canadian growers to expand as quickly as with its expansion efforts, and its peers continue expanding , too , it's possible the market could be .

  Are marijuana stocks expanding too quickly? © Provided by Fool

The marijuana industry is in its early-growth stages and many companies are staking out positions in various parts of the country — and the world. With the U.S. currently off limits until cannabis is legalized federally, companies like Canopy Growth Corp. (TSX:WEED)(NYSE:CGC) have had to look to other parts of the world for expansion opportunities.

The latest market attracting the attention of cannabis companies is South America, with Canopy Growth recently announcing the acquisition of medical marijuana company Spectrum Cannabis Colombia S.A.S. There could be many more acquisitions on the way, as Aphria Inc. (TSX:APH) has also expressed interest in the region.

Marijuana stocks surge as Canadian Senate approves legal pot

  Marijuana stocks surge as Canadian Senate approves legal pot Canadian pot stocks surged Wednesday after a bill to legalize recreational marijuana passed one of the last major hurdles in the country’s parliament. The Senate approved a bill from Prime Minister Justin Trudeau’s government to legalize cannabis, setting the stage for sales to begin in two to three months. Canopy Growth Corp., the nation’s largest marijuana producer with a market value of C$8.9 billion ($6.7 billion), soared as much as 6 percent to C$45.10, a record high. Aurora Cannabis Inc. rallied 2 percent ar 10:38 a.m., Cronos Group Inc. gained 1.7 percent and Aphria Inc. rose 2.2 percent.

July 11, 2018. admin. Blog. Are Marijuana Stocks Expanding Too Quickly ? The latest market attracting the attention of cannabis companies is South America, with Canopy Growth recently announcing the acquisition of medical …

Marijuana stock investors also have to understand that there are some emotionally invested shareholders out there who have the potential to wreak havoc on the share prices of pot stocks . Last, but not least, marijuana stock investors should understand that even with capacity expansion

As more and more countries opt to legalize marijuana, we’ll start to see more acquisitions, especially as companies look to gain first-mover advantages. This could create significant challenges for companies, however, putting even more strain on their financials.

Why investors should be concerned

Canopy Growth has turned a profit in just one of its last five quarters, and in the trailing 12 months has netted a loss of $70 million on sales of $78 million.

Aphria has fared better, with a profit in four of the last five quarter. In the past year, it has posted a profit of $32 million on $31 million in revenue. However, the company has gotten a boost from other income and non-operational items; when we look at operating income, Aphria has also been in the red in four the past five quarters.

Marijuana Stocks Surge as Canadian Senate Approves Legal Pot

  Marijuana Stocks Surge as Canadian Senate Approves Legal Pot Canadian pot stocks surged Wednesday after a bill to legalize recreational marijuana passed one of the last major hurdles in the country’s parliament. The Senate approved a bill from Prime Minister Justin Trudeau’s government to legalize cannabis, setting the stage for sales to begin on Oct. 17. Canopy Growth Corp., the nation’s largest marijuana producer with a market value of C$8.9 billion ($6.7 billion), soared as much as 6 percent to C$45.10, a record high. Aurora Cannabis Inc. rallied 3.8 percent at 3:26 p.m., Cronos Group Inc. gained 6.2 percent and Aphria Inc. rose 3.6 percent.

Buying into marijuana stocks has also been fueled by a steady shift in the way the public views pot. Many of the fastest- expanding Canadian marijuana stocks could see their outstanding share counts rise by tens or hundreds of millions of shares in the years to come as a result of these bought-deal

Canadian pot stocks are sitting pretty at the moment, but they're harboring a secret that could destroy shareholder value within a few months or years.

If these companies are already struggling to stay in the black, further expansion will only make that even more difficult. Coordinating operations across many countries around the world is no small thing, especially when you still have to focus on and prepare for legalization in Canada.

While some investors may not be concerned with a profit at this stage, the danger lies in letting that slide over the long term. Without profitability and strong free cash flow, companies will need to raise funds for expansion either through debt or share offerings, neither of which is particularly attractive for investors.

Plenty of challenges ahead

Cannabis companies in Canada already have plenty on their plate, with marijuana sales set to begin in October of this year. In an aggressive market with lots of competition and significant restrictions on what a company can do from an advertising perspective, pot stocks will have their work cut out for them.

3 stocks that have soared more than 75% in just 3 months

  3 stocks that have soared more than 75% in just 3 months 3 stocks that have soared more than 75% in just 3 monthsAnd for that reason, buying when a stock price is rising could be a better strategy than buying on a dip, since there’s likely some optimism or good news behind the shares’ growth in the first place.

CEOs of Canadian marijuana growers look like they're trying to defy the laws of supply and demand -- at least at first glance. And they're all expanding facilities to be able to grow more marijuana . Could the CEOs be counting too much on these international markets growing quickly enough to

Marijuana Stocks (www. MarijuanaStocks .com) is your best resource for today’s budding cannabis industry. Whether you’re looking for the best marijuana stocks to buy, marijuana political news, trends and articles within the cannabis industry and so much more, MarijuanaStocks .com is your

Having to worry about operations halfway around the world while dealing with domestic concerns won’t make it easy for companies that may already be spread pretty thin, especially if resources need to be diverted.

Bottom line

Expansion can be great when it makes sense to do so. However, I’m not convinced that it’s the right strategy for cannabis companies when the market in Canada is still a long way away from proving its potential. All this expansion is looking like a race to build potential and expected growth numbers in an effort to help pump up stock prices rather than a prudent strategy investors would expect from an established company.

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Fool contributor David Jagielski has no position in any of the stocks mentioned.

The SEC has a stern warning about soaring marijuana stocks .
The SEC has a stern warning about soaring marijuana stocks

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