"Fool me once, shame on you. Fool me twice, shame on me."
Last week’s monster rise and spectacular fall in shares of Tilray (NASDAQ:TLRY) and Aurora Cannabis (TSX:ACB) created another exit for cannabis investors. Those who took advantage of the market’s folly played the rally very well.
For the third time in a year, weed stocks surged only to fall steadily for a few months afterward. Last week proved different. ACB and TLRY stock gave up all of their gains in the ensuing days.
Fundamentals do not support these stocks. The more revenue it posts, the more it loses. The business is not sustainable.
Speculators optimistically embraced the hope of the U.S. legalizing marijuana to justify chasing the stocks. History is not on the side of these Canadian firms. For years, the operating costs grew, outpacing sales. Global expansion will only add to their costs. In the U.S., multi-state operators will have the home advantage. This will leave Tilray and Aurora scrambling to grow market share elsewhere.
Expanding overseas and outside of the U.S. markets will prove difficult. The U.S. has a strong cannabis market. Europe, for example, is as scattered as the Canadian market.
Sell the two cannabis stocks while you can.
