This Cannabis-Linked Stock is Down 30% Since February: Should You Buy the Dip?

Aleafia Health (TSX:ALEF) is an Ontario-based vertically integrated cannabis health and wellness company. Shares were down 0.6% in mid-afternoon trading on May 21. The stock is still up 14% in 2019 so far.

The company released its first-quarter 2019 results on May 13. Revenue shot up to $1.5 million in Q1 2019 compared to $0.1 million in the prior year. Aleafia has charged ahead after its acquisition of Emblem and aims to process and sell high-margin value-added cannabis products in 12 to 18 months.

The March acquisition gave the company access to a network of 60,000 patients, a valuable product portfolio of oils, capsules and sprays, and three dedicated cultivation and product innovation facilities.
Cannabis stocks have broadly suffered a slump so far this spring.

It should come as no surprise considering the run up in January and February combined with a disappointing batch of earnings. Even big producers like Aurora Cannabis (TSX:ACB) and Aphria (TSX:APHA) have seen sales slump so far this year. A production ramp up will eliminate the supply problem in the coming months, but fierce competition may weed out the smaller fish.

Aleafia is still trading at the low end of its 52-week range. It is a high-risk speculative buy in an industry that is facing big challenges in the second half of 2019. Shares had an RSI of 46 as of this writing, which put it in neutral territory in late May.