Cannabis Ignores Wider Stock Market, Follows its own Path

NEW YORK, October 30, 2018 /PRNewswire/ --

CannabisNewsWire Editorial Coverage  

Following a tumultuous month, cannabis continues to carve its own path rather than following the lead of other stocks.

• As the stock market plummeted earlier this month, cannabis companies stayed strong, buoyed up by legislative changes in Canada.
• The cannabis market appears set for continuing growth as it expands into expected sales worth billions of dollars across North America.
• While it still faces regulatory challenges in some locations, this market sector is preparing for corporate big players to move in.

Companies with varied interests are moving into the cannabis sector, such as lifestyle business Youngevity International, Inc. (NASDAQ:YGYI) (YGYI Profile). While the stocks of some cannabis players such as Tilray, Inc. (NASDAQ:TLRY) appear overvalued, this reflects problems with valuation tools more than the stocks themselves. The sector has developed its own heavy hitters, such as Canopy Growth Corp. (NYSE:CGC) (TSX:WEED), whose millions of square feet of growing space are now leading to sales into the United States as well as Canada. Some companies are focused only on medical products, such as GW Pharmaceuticals Plc (NASDAQ:GWPH) with its cannabis-based prescription medicines. But it's the recreational side of the cannabis space that has drawn in Constellation Brands Inc. (NYSE:STZ), a huge beverage maker that has invested $4 billion in a cannabis cultivator.

To view an infographic of this editorial, click here.

Cannabis Stocks Versus the Market 

It's been an interesting month for cannabis stocks.

Three weeks ago, cannabis looked like a particularly strong bet. As the wider stock market fell, cannabis stayed strong. Some cannabis stocks even saw significant rises in value amid promising developments from those companies. Legalization in Canada undoubtedly played a part in their success, with the run-up to Oct. 17 seeing predictions of massive profits for cannabis companies. But some commentators argued that it was part of a bigger trend in which cannabis stocks are among those that don't follow other market indicators.

Then came the week following legalization and a notable fall in the value of cannabis shares. The hype around these companies was punctured by market shifts. Had they fallen in line with the rest of the market? Was the reality of Canadian legalization catching up with the imagined utopia? Or was this simply a downturn for a sector trending separately from competitors?

More to the Market 

To understand shifts in cannabis shares, one needs to take a look at the state of the industry.

The cannabis industry isn't self-contained. The spread of legalization and the emergence of derivative products has created a diverse sector combining exciting startups with older companies dipping their toes in a novel market. Alongside the pure-play cannabis brands, there are pharmaceutical businesses and even lifestyle companies such as Youngevity International, Inc. (NASDAQ:YGYI).

These companies are selling three distinct products.

First, there's medical cannabis. Supplied on prescription to deal with pain and nausea, cannabis' medical properties remain hotly debated but that hasn't stopped the state-legalized use of it from spreading across more than half of the United States.

In material terms, recreational cannabis has exactly the same chemical makeup as some of the medicinal products. What's primarily different is the way that it's marketed, sold and used. This is cannabis used for fun and relaxation. It's now available by law in nine U.S. states and Canada.

Then there are the derivative products. Most, including those sold by Youngevity, use cannabidiol (CBD). Cannabidiol is an active ingredient that doesn't get users high. CBD can be extracted from cannabis, both from the marijuana plant as well as its tetrahydrocannabinol (THC)-free variety known as industrial hemp. Research into CBD is still in its infancy, but it is already used in a wide range of health and wellness products.

Over the past 20 years, cannabis has grown from a black market drug to a major public market product in North America, with growing influence in the rest of the world. From the first stirrings of a medical market to the current state of affairs in which a G8 country has a recreational market and the White House is hinting at U.S. reforms, it's been a fast ride. As a result, there's still a lot of uncertainty about cannabis' destiny.

Where Now for Cannabis Shares? 

The idea that weed doesn't correlate to other stocks seems to have some truth. This was shown by the events of early to mid-October, when legal reform and individual brand announcements set it on an opposite trend from other shares. While the Dow has headed towards its worst month since May 2010, cannabis stocks have carved their own path. It looked like good news for companies such as Youngevity.

For now, cannabis is offering a real challenge for traders. Cannabis stocks look overvalued based on traditional valuation metrics such as price-to-book ratio, price-to-earnings ratio or price-to-sales ratio. But these metrics are based on past results, not future valuations. Given ongoing changes, the future performance of cannabis companies will be nothing like the past. Whole new customer bases are opening up, bringing staggering potential for growth.

In the next month, there will be votes on whether to allow recreational cannabis in North Dakota and Michigan, at least one of which is likely to pass. North of the border, Canada is planning to legalize cannabis-infused edibles next year. That means a whole new sector of profit opportunities.

Then there's the impending arrival of big players in the market. Big pharmaceutical and consumables companies haven't paid much attention to cannabis yet, as its value is relatively low compared with their existing revenues. But with the market expanding, both groups may get involved - beverage and tobacco companies pursuing a natural spin-off from their existing businesses and big pharma in pursuit of new medicines. Those are moves that will bring disruption unrelated to wider markets.

As a lifestyle brand selling both coffee and cannabis derivatives, Youngevity has already placed itself to enter this cross-over market. And with its new HempFX™ line now available online, it's moving fast to profit from changes in the cannabis market.

Riding High 

Alongside medical and recreational marijuana, CBD is seeing huge growth. Youngevity CEO Steve Wallach has spoken about the huge potential of CBD products in direct sales channels, not just in America but around the world. His company is riding high on this trend with the announcement of new CBD products.

Youngevity's first offering in the CB market is the HempFX™ product line, a trio of three different hemp-derived cannabidiol oil products that contain organically grown products in proprietary formulas designed for a variety of everyday use.

The products include Soothe™, a blend of botanicals designed to relieve muscles by calming aches and pains; Uplift™, which combines CBD with St. John's Wort to improve cognitive performance and mood; and Relax™, which combines CBD with a variety of herbs and melatonin to bring relaxation and a better night's sleep.

Cannabis' Long-Term Prospects 

The signs remain good for cannabis companies. One study predicts that sales in Canada could reach $7.1 billion in 2019, $4.3 billion of that coming from the recreational market.

The boss of cannabis company Tilray, Inc. (NASDAQ:TLRY) believes that the market in the United States will soon be worth $150 billion. A leading player in the medical cannabis market, Tilray has established agreements with Canadian partners that will let it profit from changes in that country, changes that could radically improve its earnings.

Other companies are also making significant movements in the market. Drinks giant Constellation Brands, Inc. (NYSE:STZ) has invested $4 billion in Canopy Growth Corp. (NYSE:CGC) (TSX:WEED), showing that it is serious about moving into the cannabis market. Canopy Growth is one of Canada's largest cannabis companies, with 5.6 million square feet of growing space. Like Tilray, it's looking at the wider North American picture and carried out a legal transfer of cannabis to the United States, the first such transfer with a Drug Enforcement Administration (DEA)-issued permit.

Canopy Growth's strong performance has drawn the attention of companies outside the cannabis sector, leading to the headline-making investment from Constellation Brands earlier this year. Many commentators have talked about this as a chance for Constellation to produce cannabis-infused beverages, a largely untapped market likely to take off once new rules come in Canada next year. But it may represent a broader play, as alcohol and tobacco companies aim to take control of cannabis and fill the gaps as sales of their existing lines fall.

Some companies are focused only on the medical market. GW Pharmaceuticals Plc (NASDAQ: GWPH) has created the first Food and Drug Administration (FDA)-approved cannabis-based prescription medicine as part of its substantial research and design program. Even as the recreational market and CBD steal its thunder, the medical market remains strong.

Clearly, there are still big uncertainties for the cannabis market. Questions about regulation and how far legalization will spread hang over everybody's heads. Yet companies are thriving despite this, showing the rewards that so often come with risk and innovation.

For more information about Youngevity International, please visit Youngevity International, Inc. (NASDAQ:YGYI).

About CannabisNewsWire 

CannabisNewsWire (CNW) is an information service that provides (1) access to our news aggregation and syndication servers, (2) CannabisNewsBreaks that summarize corporate news and information, (3) enhanced press release services, (4) social media distribution and optimization services, and (5) a full array of corporate communication solutions. As a multifaceted financial news and content distribution company with an extensive team of contributing journalists and writers, CNW is uniquely positioned to best serve private and public companies that desire to reach a wide audience of investors, consumers, journalists and the general public. CNW has an ever-growing distribution network of more than 5,000 key syndication outlets across the country. By cutting through the overload of information in today's market, CNW brings its clients unparalleled visibility, recognition and brand awareness. CNW is where news, content and information converge.

Receive Text Alerts from CannabisNewsWire: Text "Cannabis" to 21000

For more information please visit https://www.CannabisNewsWire.com and or https://CannabisNewsWire.News

Please see full terms of use and disclaimers on the CannabisNewsWire website applicable to all content provided by CNW, wherever published or re-published: http://CNW.fm/Disclaimer

DISCLAIMER: CannabisNewsWire (CNW) is the source of the Article and content set forth above. References to any issuer other than the profiled issuer are intended solely to identify industry participants and do not constitute an endorsement of any issuer and do not constitute a comparison to the profiled issuer. FN Media Group (FNM) is a third-party publisher and news dissemination service provider, which disseminates electronic information through multiple online media channels. FNM is NOT affiliated with CNW or any company mentioned herein. The commentary, views and opinions expressed in this release by CNW are solely those of CNW and are not shared by and do not reflect in any manner the views or opinions of FNM. Readers of this Article and content agree that they cannot and will not seek to hold liable CNW and FNM for any investment decisions by their readers or subscribers. CNW and FNM and their respective affiliated companies are a news dissemination and financial marketing solutions provider and are NOT registered broker-dealers/analysts/investment advisers, hold no investment licenses and may NOT sell, offer to sell or offer to buy any security.

The Article and content related to the profiled company represent the personal and subjective views of the Author, and are subject to change at any time without notice. The information provided in the Article and the content has been obtained from sources which the Author believes to be reliable. However, the Author has not independently verified or otherwise investigated all such information. None of the Author, CNW, FNM, or any of their respective affiliates, guarantee the accuracy or completeness of any such information. This Article and content are not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action; readers are strongly urged to speak with their own investment advisor and review all of the profiled issuer's filings made with the Securities and Exchange Commission before making any investment decisions and should understand the risks associated with an investment in the profiled issuer's securities, including, but not limited to, the complete loss of your investment.

CNW & FNM HOLDS NO SHARES OF ANY COMPANY NAMED IN THIS RELEASE.

This release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E the Securities Exchange Act of 1934, as amended and such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. "Forward-looking statements" describe future expectations, plans, results, or strategies and are generally preceded by words such as "may", "future", "plan" or "planned", "will" or "should", "expected," "anticipates", "draft", "eventually" or "projected". You are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events, or results to differ materially from those projected in the forward-looking statements, including the risks that actual results may differ materially from those projected in the forward-looking statements as a result of various factors, and other risks identified in a company's annual report on Form 10-K or 10-KSB and other filings made by such company with the Securities and Exchange Commission. You should consider these factors in evaluating the forward-looking statements included herein, and not place undue reliance on such statements. The forward-looking statements in this release are made as of the date hereof and CNW and FNM undertake no obligation to update such statements.

CannabisNewsWire (CNW) & NetworkNewsWire (NNW) are proud to be affiliated partners of the Investor Brand Network (IBN)

About IBN 

Over the past 10+ years we have consistently introduced new network brands, each specifically designed to fulfil the unique needs of our growing client base and services. Today, we continue to expand our branded network of highly influential properties, leveraging the knowledge and energy of specialized teams of experts to serve our increasingly diversified list of clients.

Please feel free to visit the Investor Brand Network (IBN) http://www.InvestorBrandNetwork.com

Corporate Communications Contact:
CannabisNewsWire (CNW)
Denver, Colorado
http://www.CannabisNewsWire.com
+1-303.498.7722 Office
Editor@CannabisNewsWire.net

Media Contact:
FN Media Group, LLC
NNW@FinancialNewsMedia.com
+1-(954)345-0611