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Marijuana stock analysis: You can predict a pothead. A pot stock, not so much.

A full month ahead of complete cannabis legalization in Canada (Oct 17, 2018), medical marijuana company Tilray (TLRY) took a wild trip on the market this Wednesday. The stock hit almost $21 billion in market cap in trading hours. But is it a good idea for you as an investor to join in on the smoking? Here’s what you need to know.

Rule of the short sellers

Yet to be determined if it a bubble, the pot stocks are now in short selling territory. It makes for a very bad investment, per se. Pot stock shorting jumped 44% by the second-quarter end this year. And if you are a short seller, you need to worry too. Short sellers lost as much as $500 million this year in the sector.

Whatever the case, it is now a full-blown war between short sellers and the various medical marijuana corporations who don’t want their stock to be tools to market fluctuations.

Marijuana Industry Analysis: Are Pot Stocks Good Investment?
A marijuana plant (CREDIT: Marco Jimenez)

Dangerous stock trips

Tilray, which opened 51% higher at $233% was party due to unruly spikes and dips all through Wednesday, but the real fun began an hour and a half before closing. The stock skyrocketed more than 94% to hit a high of $300.
Share trading was halted on its account. When it resumed, the stock was on freefall – it shed almost all its gains 30 minutes before closing. Finally, at the market close, it was back at $214. There you go.

Unclear US regulations

Keeping the “is marijuana good for you?” debate aside, let’s face reality. US regulations are still on tenterhooks about this one. Is it legal, is it illegal? Where is it illegal? Is selling illegal? Is buying legal? Do you need a prescription? There is no unified federal governance on this, and that puts the pot industry in a precarious position.

While the FDA did clear Tilray to export medicinal cannabis to US soil, California, for scientific research, it has a lot of fine print. “This is the first time a Canadian (licensed producer) has demonstrated to the FDA that a study drug produced in Canada from the cannabis plant can meet its standards,” said Dr. Catherine Jacobson, Tilray’s director of clinical research in a local interview. This could be a sign of good times ahead. But not necessarily a good time to invest.

Marijuana Industry Analysis: Are Pot Stocks Good Investment?
A twenty-four-year-old woman smoking medical marijuana to relieve symptoms of PTSD, depression, and anxiety. (CREDIT: Sharon McCutcheon)

Unrealistic valuation

This is where it gets tricky. Pot sale is still a very careful business. It also affects the returns. On paper, the valuations seem a little unreal. Take the Price-to-Sales ratio of the pot industry, for instance.

  • Tilray (TLRY) – 970.81
  • Aurora (ACBFF:otc) – 120.86
  • Cronos (CRON) – 512.33
  • Canopy Growth (CGC) – 142.77
  • GW Pharmaceuticals (GWPRF:otc) – 250.69

The valuation of Tilray necessarily does not translate to the rest of the industry. While hype does. If you listen around, there is huge chatter about Marijuana stocks. But that’s not a sign of a safe investment – that’s the sign of a bubble, if any.

Marijuana or weed stocks

 

Don’t burn your roach just for a high

Extreme predictions, more chatter, and judging people who disagree with your analysis while not having a fair financial know-how about the subject are all signs of a bubble. While pot stocks are not there yet, it is showing a rather good tendency toward it.

Yes, Elon Musk smoked a split on a live podcast. But his security clearances are also being checked now due to it. (Sending stuff up the sky while being high doesn’t send a very assuring message, does it?) So take a breather and research more before jumping into investing in a pot stock. As it stands now, it is not advisable to put your money in it – lest you want to see it go up in smoke as well.

(DISCLAIMER: This analysis does not necessarily imply the views of AlphaStreet, and contains opinions of the author alone.)

Tilray soars on CEO’s optimistic views on marijuana industry

Darden beats Q1 sales and earnings expectations; raises outlook

Darden Restaurants Inc. (DRI) topped analysts’ expectations on sales and earnings for the first quarter of 2019. Shares rose over 4% during premarket trade following the results announcement.

The restaurant chain reported a 6.5% increase in total sales to $2.06 billion compared to the same period last year. The sales increase included a 3.2% growth from the addition of 52 net new restaurants. Blended same-restaurant sales rose 3.3%.

Net income grew to $166.2 million or $1.32 per share from $119 million or $0.93 per share last year. Adjusted diluted EPS from continuing operations was $1.34.

Darden Restaurants first quarter 2019 earnings
Darden Restaurants Q1 2019 Earnings Infographic

Darden posted net sales increases across all its segments during the quarter. Same-restaurant sales increased across most of its brands except for Cheddar’s Scratch Kitchen and Seasons 52. The highest growth was in Olive Garden where same-restaurant sales rose 5.3%.

Last month, the company was affected by a cybersecurity incident at several of its Cheddar’s Scratch Kitchen restaurants in which payment card information is said to have been compromised. Darden took immediate steps to rectify the situation and is cooperating with the investigation into the incident.

Based on its year-to-date results and expectations for the remainder of the year, Darden increased its outlook for the full year of 2019. The company now expects total sales growth of 5% to 5.5% versus the previous range of 4% to 5%.

Same-restaurant sales are expected to grow 2% to 2.5% versus the previous expectation of 1% to 2%. Diluted EPS from continuing operations is expected to be $5.52 to $5.65 versus the prior range of $5.40 to $5.56.

Darden’s board of directors declared a quarterly cash dividend of $0.75 per common share, payable November 1 to shareholders of record on October 10.

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