Wall Street continued to handle volatility on Monday, with Dow Jones Industrial Average working the road lower even when other parts of the market saw profits. With the win season turning a crescendo this week, investors closely look at the specific outlook for certain corners of the market and it contributes to differences among the various major benchmarks most often followed by investors. In the middle of the crossroads, the marijuana stocks took particularly hard blows and New Age Beverages (NASDAQ: NBEV) Tilray (NASDAQ: TLRY) and Canopy Growth NYSE: CGC) were among the worst artists of the day. Here’s why they did it badly.
Take A Break
All three of these stocks have given back some of their profits after the long-awaited legalization of recreational cannabis on the Canadian market last week. During the month leading up to October 1
7, the start date for legal cannabis sales, New Age Beverages was tripled in value, while Tilray had more than doubled since the end of August and Canopy Growth had seen more modest gains between 10% and 20
But since then, the reality of the Canadian cannabis market has put pressure on the shares. Delivery restrictions have highlighted the need for further development of production facilities and retailers, before consumers will be able to get all the marijuana products they want, but capacity expansion also gives rise to fear of price reductions in the long run. Threads that needle can be problematic for the industry in general, and it explains the random mood in recent days.
Some business-specific issues
In addition to the general trends being short-term negative, there are also some issues specific to these individual companies:
- New Age Beverages has seen its conference presentation of its cannabidiol-infused beverages to come and go, but it is now clear to investors that the process of actually making these products accessible to consumers can take significantly longer. At a key moment for cannabis companies, the delay is a threat to developing a competitive advantage with enhancers, especially as higher-profile beverage companies are looking closer to the cannabis market. It explains much of its 16% decrease today.
- Tilray fell almost 16%, as investors continue to weigh the pros and cons of the marijuana manufacturer’s limited asset portfolio. Tilray has more than 76 million outstanding shares, but only about 10 million of these shares are trading according to Yahoo! Finance. It has created an environment that encourages short pressures, but when demand for stocks dries, it can also cause volatile downward movements.
- Canopy Growth lost 11%. Many see Canopy as the industry’s giant, especially in view of its key partnership with beer and spirits giant Constellation Brands . However, for investors, the fact that Constellation is entitled to take a controlling influence in Canopy with warrants is that it can exercise $ 50.40 Canadian dollars per share – about $ 38.50 in US dollars at current exchange rates – which is likely to endorse how far the stock could climb
Investors should expect the marijuana shares to remain volatile, with movements in both directions probably. Despite the potential for cannabis potential to become a much larger consumer market than before, there is no guarantee that those who invest in the space right now will receive huge profits from the three best marijuana shares.
Dan Caplinger has no position in any of the mentioned shares. Motley Fool recommends constellation marks. Motley Fool has a policy of disclosure.