Cannabis Sector Down as Pricing Pressure Fears Abound

On November 12, the cannabis sector was in the red despite the broader US equity market trading in positive territory. At 1:15 PM ET, the ETFMG Alternative Harvest ETF (MJ) was down 2.2%, while the S&P 500 Index and the Dow Jones Industrial Average were up 0.3% and 0.1%, respectively.

Big movers in cannabis

Today, Cronos Group (CRON) reported lower-than-expected third-quarter revenue. The fall in its revenue per gram due to the oversupply of cannabis was one of the reasons for its lower overall revenue. Pricing pressure fears appear to have dragged the cannabis sector down. Let’s look at some of the big movers in cannabis today.

OrganiGram falls over 15%

On November 11, OrganiGram Holdings (OGI) provided guidance for the fourth quarter and 2019. The company’s management expects to report revenue of 16.3 million Canadian dollars in the fourth quarter, lower than analysts’ estimate of 25.6 million Canadian dollars.

Following the company’s weak guidance, AltaCorp Capital lowered its price target on the stock from 13.15 Canadian dollars to 6.5 Canadian dollars. OrganiGram’s lower-than-expected revenue guidance and AltaCorp’s downgrade appear to have dragged its stock down. At 1:02 PM ET, OrganiGram was down 15.6% from its previous day’s closing price.

Canopy Growth down over 4%

Last month, as reported by Cantech Letter, Raymond James analyst Rahul Sarugaser stated that Canopy Growth (WEED) (CGC) and Tilray had the highest production costs among the top five cannabis companies. It appears analysts’ pricing pressure fears could have a more significant effect on Canopy Growth, leading to a fall in its stock price. At 1:02 PM ET, the company was down 4.2%. Canopy Growth will report its second-quarter earnings results on November 14. For a look at analysts’ estimates, read Can Canopy Beat Q2 Estimates and Boost the Sector?

Cronos Group misses analysts’ estimates

On November 12, Cronos Group (CRON) reported its fiscal 2019 third-quarter earnings results. The company reported revenue of 12.7 million Canadian dollars, lower than analysts’ estimate of 14.14 million Canadian dollars. Its EBITDA also failed to meet analysts’ expectations. This weak third-quarter performance appears to have led to a fall in the company’s stock price. At 1:02 PM, the company was down 1.4%.

Curaleaf was up over 10%

Despite the weakness in the cannabis sector, Curaleaf Holdings (CURA) was trading 10.7% higher at 12:58 PM ET today. Last week, MKM Partners upgraded the stock from “sell” to “neutral” and raised its price target from 5 Canadian dollars to 6 Canadian dollars. Overall, analysts are bullish on the stock. Of the eight analysts that cover the stock, seven are favoring a “buy” rating. For Curaleaf, analysts have given a consensus price target of 16.16 Canadian dollars, which implies a return potential of 146.7% from its closing price on November 11. The company will report its third-quarter earnings results on November 19. Stay tuned for our earnings preview.

Aurora Cannabis will report its first-quarter earnings results on November 14. Read Aurora Cannabis: Can It Boost the Industry in Q1? for a look at analysts’ expectations. Also, be sure to check out 420 Investor Daily for more marijuana-related news and updates.