Research Notes: Can Cannabis Stocks Make A Comeback? (Part 2)
US pot plays have crashed, but long-term hopes for reform remain
Highlights:
U.S. cannabis producers have only marginally outperformed their higher-profile Canadian peers.
The sector’s poor performance seems surprising given a larger market, impressive EBITDA margins, and a steady march towards federal legalization.
But those margins make investors nervous, and arguments about ‘unfair’ taxation miss a key point.
The long-term case for cannabis stocks is getting interesting. U.S. plays are cheap but they’re not simple.
Last week, we asked whether beaten-down Canadian cannabis stocks could make a comeback. The market’s initial answer was “absolutely not”. The day we published, Canopy Growth CGC 0.00%↑ fell 41% after an agreement with debtholders appears to have concerned investors. Or at least that’s the easy story to tell. Given recent volatility in CGC stock, causation isn’t certain.