A lot of short sellers have recently targeted overvalued cannabis shares. While the competition is increasing and many new companies are formed outside U.S, the expected revenues might be lower than earlier estimated. Several of the worst performers among shares in the cannabis sector got valuations over 100 years of current earnings. Is it reasonable even with 20x P/E for cannabis shares? Many investors believe that valuations been way too high lately, and a correction is due. Probably, we haven’t seen the lowest price yet for many of the top shares targeted by short selling experts.
A great deal of green stuff gone up in smoke lately, and we’re not very likely to see it turn back to the old valuations in the coming months. The short sellers are here to stay and medical marijuana or medical cannabis, whatever your call it, is one of their main targets right now. Ihor Dusaniws from S3 Partners says that investors shorting cannabis shares has made over $100 million in profit on Monday alone this week.
1. Canopy Growth Corp
Canopy Growth (WEED:CN) got the most high flying ticker at the Canadian stock exchange: WEED. Yes, you read it right. Q1 saw adjusted losses of C$0.38 a share, while revenue hit C$111.9 million. Analysts have not been impressed lately and 69.9 per share the 29/4, 2019 to 36.5 today. In the middle of September, short sellers had sold shares in Canopy Growth worth $1.27 billion short or about 10% of the outstanding share capital. Many cannabis analysts expect the shares to fall way lower in the coming months.
2. Aurora Cannabis Inc
Aurora Cannabis (NYSE: ACB) are convinced that medical cannabis shouldn’t be costly, inconsistent, or difficult to access. They offer free shipping in Canada and have a flat rate pricing. During the latest report, released 12th of September 2019, they made a break even earnings per share. Investors enjoying short selling with CFD’s or the old fashioned “call and borrow some shares” are taking an interesting Aurora. 11th of March, 2019 Aurora shares stood at 9.61 and today they closed at 6.49. Currently, $922 million of the share capital or 15.9% of outstanding shares are owned by short sellers that believe the company will continue down.
3. Cronos Group Inc
Cronos Group (NASDAQ: CRON) got 3 different brands. Spinach Cannabis is probably the one standing out the most, while they also might face penalties from regulation. Their marketing promote Spinach for anyone looking for entertaining, fun ways to enhance activities. Cronos Group claims that they products bring friends together and make experiences more enjoyable. Quite strange marketing for a medical cannabis brand, but I guess they continue as long as it works? Currently,
$498.9 million shares (almost 10%) are owned by short sellers that believe in new lows.
4. Tilray Inc
Tilray (NASDAQ: TLRY) focus on cannabis research, cultivation of GMP-certified medical cannabis and processing and distributing products to patients and pharmacies. Tilray shares have gone from over 100 USD in January 2019 to around 30 USD today. Around 8.7% of the shares are currently owned by short selling investors and individuals or about $214 million worth of equity. Analysts such as Benchmark and also Cowen and Company lowered their target price drastically in the last few weeks, the first one from 120 to 80 and the second company from 150 to 60 usd.
5. Hexo Corp
Canadian Hexo (NYSE: HEXO) was founded 2013 and the company indicated they will grow from 4M in 2018 to 400M in revenue 2019. Sales even declined between Q2 and Q3 last year and growth prospects doesnt look very promising. During the 29th of April, Hexo Corp stood in 11.1 USD and today they closed at 5.73. About $182.2 million has been invested in Hexo by short sellers and more are likely to jump on the train unless they start showing some serious growth soon.
6. Charlotte’s Web Holdings Inc
Charlottes Web Holdings (OTC: CWBHF) is one of the smaller listed cannabis related companies in North America. They got a current P/E of 115 and price to sales ratio of 19.5. Currently, about $55 million shares are shorted by traditional means (selling borrowed shares) or about 3.1% of the total market capital. Another way to go high when Charlotte’s Web Holdings are going low is to sell CFD’s in the company by Plus500.