The marijuana sector has been on a major rally over the last year when the product was legalized in Canada. However, the past few months have not been particularly great for most pot stocks. Many of the stocks which recorded huge gains have lost a lot in value during the period.
That said, many marijuana stocks have reported impressive earnings in Q2 2019. Could the sector show early signs of another rally soon? On that note, here are two pot penny stocks to watch as the sector recognizes strong earnings growth
Pot Penny Stocks To Watch #1: Hexo Corp (HEXO
Shares of marijuana penny stock Hexo Corp (HEXO – Stock Report) continued higher this week. The stock was beaten down harshly earlier this summer. But a recent spurt of bullish momentum has helped in a recovery for HEXO. The stock hit previous lows of $3.73 in late July before climbing back to highs of $4.89 this month.
Optimism surrounding marijuana stock earnings has been an industry-wide catalyst as it would appear. Village Farms (VFF – Stock Report) was the most recent addition to this flow of optimism. What could also be helping HEXO stock right now is the upcoming rule additions for cannabis-infused beverages in Canada.
“We’ll have a very large supply so we’ll be in a good position to be able to meet the demand of the marketplace and at the same time also ensure that we’re meeting the variety that the marketplace wants.”
Jay McMillan, VP of Strategic Development, Hexo Corp said in an interview at the World Cannabis Congress
Essentially, on the one-year anniversary, laws that oversee derivatives like edibles, topicals, concentrates, etc. will go into effect. But they won’t be available for sale until December. In any case, based on the deal Hexo has with Molson Coors (TAP), this could be a good time to be watching a pot penny stock like Hexo Corp.
Market For Derivatives Could Help Pot Penny Stocks
Deloitte published a report earlier this year discussing the impact of the “derivatives” market for marijuana. It pegs the niche at roughly $2.7 billion annually. Part of the breakdown of that number shows $1.6 billion coming from edibles and over half a billion dollars coming from cannabis-infused beverages. But the report did express something that we tend to stress as well. Making money with penny stocks takes time. Though this event could mark Marijuana 2.0, Deloitte explains that growth will take time.
“(Growth) will be easily north of 24 months,” said Jennifer Lee, the global cannabis practice leader at Deloitte. “This is going to be a very profitable industry, but if you expect to make money overnight, it’s not going to happen.”
Regardless of the length of time for growth, we have all seen how industry-wide events can become catalysts. With October right around the corner, the latest move HEXO stock has seen, could be a result of speculative anticipation. In the end, it has found itself on a few penny stocks watch lists over recent weeks.
Another Marijuana Penny Stock To Watch In August: Supreme Cannabis (SPRWF) (FIRE)
Another one of the marijuana penny stocks to watch this month, Supreme Cannabis (SPRWF – Stock Report) (FIRE) made headlines this week. The pot company released earnings guidance for its Q4 2019 and fiscal 2020 this week. Not only does Supreme expect net revenues to reach $19 million for Q4, but it also sees 2020 net revenue between $150 – $180 million.
Despite the previous trend marijuana stocks saw this summer, many companies show optimistic outlooks for the sector. Supreme Cannabis has built a portfolio of brands that range from growing cannabis to CBD wellness brands. One thing that also strikes a chord in its guidance dealt with its debt. The company is “pursuing non-dilutive financing with tier-one banks.”
Compared to how some companies raise money, non-dilutive financing suggests that Supreme has shareholders in mind as well as the company’s business. But this hasn’t come without hurdles. SPRWF stock has been beaten down for most of 2019. In fact, shares hit 2019 lows of $0.85, which just so happens to match its 52-week low from December 2018. The next question that comes of this is how will the next few weeks look? When you look at marijuana stocks in general, the sector itself has been its own catalyst.
No matter what is happening in the world, pot penny stocks to buy tend to beat to the sound of their own drum. This compares to other sectors like gold stocks that may rise and fall with whatever happens within the broader market. Considering the outlook for the company and the state of what could become “Marijuana 2.0” next quarter, Supreme may be another pot penny stock to add to the list of penny stocks to watch this year.
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