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Aug. 18, 2019, 12:11 p.m. EDT

Cannabis stocks climb for the first time in three days with Aurora leading the pack

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By Ciara Linnane, MarketWatch


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Cannabis stocks have been slammed this week by some disappointing earnings

Cannabis stocks rose for the first time in three sessions Friday, reversing some of this week’s losses that were driven by disappointing earnings with Aurora Cannabis /zigman2/quotes/210559470/composite ACB -2.09%   /zigman2/quotes/203734337/delayed CA:ACB -2.71%  leading the pack with a 5% gain.

The ETFMG Alternative Harvest ETF /zigman2/quotes/204332491/composite MJ 0.00%  was up 2% with 32 of its 38 constituent stocks gaining ground. The Horizons Marijuana Life Sciences ETF /zigman2/quotes/208856346/delayed CA:HMMJ -2.84%  was up 3.3% with 46 of its 54 member stocks gaining. The two ETFs have declined more than 7% this week, as major benchmarks swung between heavy losses and gains.

Market leader Canopy Growth shares /zigman2/quotes/200603886/composite CGC -8.51%   /zigman2/quotes/202205609/delayed CA:WEED -8.71%  were up 3.2%, but remain down 14% on the week. The stock fell after posting a more than a billion Canadian-dollar loss for its latest quarter and revenue that fell short of estimates.

GMP analyst Ryan Macdonell said Friday Canopy may have lost its market lead in adult-use recreational cannabis in Canada. The analyst slashed his stock price target to C$45 ($33.9) from C$65. Canopy’s C$6.4 million provision against oil and gelcaps being returned due to oversupply may be a company-specific problem, said Macdonell.

Cannabis Watch: For all of MarketWatch’s coverage of cannabis companies

Macdonell calculated that 23% of the company’s third-quarter and 50% of its fourth-quarter recreational market volumes were extract products, while extracts accounted for an average of 7% of the sell-through volume in the recreational market since inception.

See now: The $4 billion time bomb ticking away inside the biggest marijuana companies

“We are decreasing our price target as the lackluster performance in recreational market sales could indicate that Canopy has lost the leading position,” he wrote in a note. “We remain positive on WEED over the long-term as we expect the company is well prepared for cannabis 2.0.,” he said, referring to the launch of new formats including edibles later this year.

Don’t miss: Wall Street’s latest billion-dollar pot company had a half-ton of bad weed returned as it was going public

Benchmark analyst Mike Hickey cut his price target to C$60 from C$100 and said the numbers were disappointing.

See also: Cannabis companies are having a horrible summer as scandals mount and stocks slide

“With the global cannabis market not achieving the presumed near term growth opportunity for WEED, we suspect investors are now favoring disciplined growth and a path to profitability, both of which WEED has not demonstrated,” said the analyst.

Flowr Corp. shares /zigman2/quotes/205237089/delayed FLWPF +0.37%   /zigman2/quotes/206895064/delayed CA:FLWR 0.00%  rose, after the company posted second-quarter earnings that showed revenue of C$2.2 million, the midpoint of its guidance. But gross margin fell and the company’s average net selling price weakened from the first quarter, as kilogram produced and kilograms sold rose.

“Sentiment on Flowr is not great at the moment,” said Jefferies analyst Ryan Tomkins. “Their premium proposition in Canada (while still compelling for us) is still yet to be proven, while investors have also expressed a concern around the recent decision to buy 100% of Holigen (moving away from their current premium strategy and resulting in a large drain on resources).”

Against that background, the quarterly numbers are unlikely to help boost sentiment, he wrote. Tomkins rates the stock a hold.

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Investing in marijuana or cannabis stocks can be risky. Small companies that are actually handling and growing marijuana might not be legal at a federal level. Here's what you need to know.

Elsewhere in the sector, Cronos /zigman2/quotes/206842762/composite CRON -6.66%   /zigman2/quotes/202715342/delayed CA:CRON -6.53%  was up 1.7%, OrganiGram Holdings’s stock /zigman2/quotes/209289540/lastsale OGI -1.42% was up 3.8%. and Aphria /zigman2/quotes/207425803/composite APHA -3.66%   /zigman2/quotes/205566616/delayed CA:APHA -3.83%  was up 3.6%.

Hexo /zigman2/quotes/206508254/composite HEXO -4.14%  was up 4.7%. Aleafia /zigman2/quotes/203485112/delayed ALEAF -0.77%   /zigman2/quotes/200214885/delayed CA:ALEF 0.00%  was up 1.5%.

CannTrust /zigman2/quotes/201332942/composite CTST +7.87% /zigman2/quotes/206800806/delayed CA:TRST +5.23%  rose 1.5%, but was still down 35% on the week, after revealing regulatory issues with a second of its Ontario facilities.

Read now: KPMG withdraws audits for CannTrust’s 2018 and March quarter after illegal grow scandal

/zigman2/quotes/210559470/composite
US : U.S.: NYSE
$ 5.16
-0.11 -2.09%
Volume: 9.52M
Sept. 19, 2019 6:30p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$5.31 billion
Rev. per Employee
$94,401
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/zigman2/quotes/203734337/delayed
CA : Canada: Toronto
$ 6.83
-0.19 -2.71%
Volume: 2.93M
Sept. 19, 2019 4:25p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$7.03 billion
Rev. per Employee
$123,163
loading...
/zigman2/quotes/204332491/composite
US : U.S.: NYSE Arca
$ 23.30
0.00 0.00%
Volume: 0.00
Sept. 19, 2019 8:00p
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/zigman2/quotes/208856346/delayed
CA : Canada: Toronto
$ 14.01
-0.41 -2.84%
Volume: 231,188
Sept. 19, 2019 3:59p
loading...
/zigman2/quotes/200603886/composite
US : U.S.: NYSE
$ 26.34
-2.45 -8.51%
Volume: 5.75M
Sept. 19, 2019 6:30p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$9.16 billion
Rev. per Employee
$115,039
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/zigman2/quotes/202205609/delayed
CA : Canada: Toronto
$ 34.92
-3.33 -8.71%
Volume: 2.25M
Sept. 19, 2019 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$12.15 billion
Rev. per Employee
$150,142
loading...
/zigman2/quotes/205237089/delayed
US : U.S.: OTC
$ 2.42
+0.0090 +0.37%
Volume: 19,297
Sept. 19, 2019 3:59p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$161.40 million
Rev. per Employee
N/A
loading...
/zigman2/quotes/206895064/delayed
CA : Canada: TSX Venture
$ 3.20
0.00 0.00%
Volume: 81,818
Sept. 19, 2019 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$213.42 million
Rev. per Employee
N/A
loading...
/zigman2/quotes/206842762/composite
US : U.S.: Nasdaq
$ 10.23
-0.73 -6.66%
Volume: 5.37M
Sept. 19, 2019 4:00p
P/E Ratio
23.08
Dividend Yield
N/A
Market Cap
$3.49 billion
Rev. per Employee
$55,248
loading...
/zigman2/quotes/202715342/delayed
CA : Canada: Toronto
$ 13.60
-0.95 -6.53%
Volume: 905,383
Sept. 19, 2019 4:00p
P/E Ratio
22.98
Dividend Yield
N/A
Market Cap
$4.64 billion
Rev. per Employee
$70,780
loading...
/zigman2/quotes/209289540/lastsale
US : U.S.: Nasdaq
$ 4.16
-0.06 -1.42%
Volume: 986,587
Sept. 19, 2019 4:00p
P/E Ratio
24.43
Dividend Yield
N/A
Market Cap
$649.72 million
Rev. per Employee
$49,972
loading...
/zigman2/quotes/207425803/composite
US : U.S.: NYSE
$ 6.05
-0.23 -3.66%
Volume: 2.35M
Sept. 19, 2019 6:30p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$1.52 billion
Rev. per Employee
$147,410
loading...
/zigman2/quotes/205566616/delayed
CA : Canada: Toronto
$ 8.04
-0.32 -3.83%
Volume: 1.13M
Sept. 19, 2019 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$2.02 billion
Rev. per Employee
$190,843
loading...
/zigman2/quotes/206508254/composite
US : U.S.: NYSE
$ 3.94
-0.17 -4.14%
Volume: 3.08M
Sept. 19, 2019 6:30p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$1.01 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/203485112/delayed
US : U.S.: OTC
$ 0.71
-0.0056 -0.77%
Volume: 113,432
Sept. 19, 2019 3:59p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$193.79 million
Rev. per Employee
N/A
loading...
/zigman2/quotes/200214885/delayed
CA : Canada: Toronto
$ 0.94
0.00 0.00%
Volume: 280,095
Sept. 19, 2019 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$255.64 million
Rev. per Employee
N/A
loading...
/zigman2/quotes/201332942/composite
US : U.S.: NYSE
$ 1.37
+0.10 +7.87%
Volume: 6.99M
Sept. 19, 2019 6:30p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$144.73 million
Rev. per Employee
$133,643
loading...
/zigman2/quotes/206800806/delayed
CA : Canada: Toronto
$ 1.81
+0.09 +5.23%
Volume: 4.98M
Sept. 19, 2019 4:15p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$191.21 million
Rev. per Employee
$171,989
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Ciara Linnane is MarketWatch's investing- and corporate-news editor. She is based in New York.

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