The marijuana industry has come blazing out of the gates in 2019, with the first-ever tradable cannabis ETF, the Horizons Marijuana Life Sciences ETF, up 51% through the end of April. That not-too-shabby performance, which essentially triples the return of the S&P 500, signals how excited investors are about the long-term prospects for legal weed.
Then again, April was arguably the “worst” month of the year for pot stocks, with the Horizons Marijuana Life Sciences ETF declining by 1.6%. Of the 52 marijuana stocks I regularly track, nearly half of them (25) ended April lower.
But there’s a big difference between simply ending the month lower and face-planting. The following five marijuana stocks all face-planted in April and lost at least 15% of their value. Let’s take a closer look at what was going on with these popular pot stocks.
Tilray: Down 22%
Last year, Tilray (NASDAQ:TLRY) was briefly the story stock among all story stocks. Following its initial public offering on the Nasdaq in July, it rallied from a list price of $17 to hit an intraday high of $300 per share less than two months later. Of course, it’s been a complete train wreck since, with shares losing another 22% in April to hit level that haven’t been seen since August 2018.
The catalyst for the decline look to primarily be a carryover from its disappointing fourth-quarter earnings report in mid-March. Aside from simply missing Wall Street’s revenue estimate — Tilray generated $15.5 million in fourth-quarter sales, which was a tripling from the prior-year period — the company threw a monkey wrench into its long-term strategy by announcing that it would be shifting its focus from Canada to Europe and the United States. Yes, the peak market potential for the EU and the U.S. are much higher than Canada, but to completely shift up the company’s strategy so recently after the launch of recreational cannabis in Canada is a head-scratcher. It’s left yours truly wondering if Tilray was completely outmaneuvered in Canada by the likes of Canopy Growth and Aurora Cannabis.
What’s more, Tilray’s strategy shift probably means pushing back recurring profit projections even further, as well as puts the company’s domestic capacity expansion projects in limbo. Wall Street went from reasonable clarity to countless question marks with regard to Tilray, and its stock is rightly paying the price.
Aleafia Health: Down 20%
Aleafia Health (NASDAQOTH:ALEAF) has had a busy 2019, with the company closing a transformative acquisition of Emblem in mid-March, and announcing the addition of 50,000 kilograms of extraction capacity in April, which will be begin production sometime in the mid-third quarter. But it also had a miserable April, ending the month 20% lower from whence it began.
Although it would be easy to blame the company’s fourth-quarter earnings report for this weakness, it was released well after most of the carnage. Rather, it looks to be the uncertainties surrounding the Aleafia Health-Emblem merger that are getting the best of shareholders for the time being.