This week was an extremely volatile week for the stock market, as coronavirus fears spread and brought the indexes crashing down.  The Dow Jones Industrial Average recorded its largest single-day drop of almost 1,200 points as investors hit the sell buttons across the board. 

The cannabis sector hit fresh 52 week-lows and many are wondering when it will reach a bottom.  As we move further into earnings season, this quarter will be a real test for many of the cannabis companies. Investors are wanting to see cannabis companies restructure to cut costs and make a push towards profitability. Inevitably we will see the strong survive and the weak die off, and it’s already starting to happen. 

Innovative Industrial Properties Inc. (IIPR - Get Rating) Reports Earnings

This week IIPR reported earnings for the fourth quarter and full-year 2019. Their acquisitions drove revenue growth up 269% for Q4. Revenue climbed 311% in Q4 and net Income was up 293%. Innovative Industrial Properties generated total revenues of approximately $17.7 million in the quarter which represents a 269% increase from the prior year’s quarter. IIPR posted net income available to common stockholders of approximately $9.6 million for the quarter. Due to the market panic, IIPR was unable to tack on gains after their fantastic quarter and is trading under $100.

Aurora Cannabis (ACB - Get Rating) hits fresh 52-week lows

Although ACB was not the worst-performing cannabis stock this week, the company did hit fresh 52-week lows as the sector tanked. ACB received a downgrade on Monday to start off the week as Cowen analyst Vivian Azer cut her forecast for three Canadian cannabis firms – Aurora, Tilray (TLRY - Get Rating), and Sundial Growers (SNDL - Get Rating).  Azer said that she expects the cannabis 2.0 market to offer less of a boost than many were expecting. Azer downgraded Aurora Cannabis to market perform from her previous rating of outperform. 

Yet, on the same day though, ACB bull Pablo Zuanic upgraded his price target on Aurora Cannabis to $3.80 from his original target of $3.75. Zuanic said he is expecting a rerating of Candian licensed producers in the next year. Zuanic said recent moves taken by the company to shore up its balance sheet and protect margins were positives and the stock’s underperformance versus peers is overdone. 

Zuanic highlights that recreational sales in Canada are second only to those of Canopy Growth (CGC - Get Rating). Over the last five quarters, it is one of just five companies that have been able to maintain new recreational prices above $5.20 a gram.

GW Pharmaceuticals (GWPH - Get Rating) plunges after earnings release

This week GWPH reported earnings and the company posted a much smaller loss than what Wall Street was expecting. The company posted fourth-quarter and year-end 2019 financial results with revenues of $109.1 million for the fourth quarter and $311.3 million for the full year.

Their total Epidiolex net product sales came in at $104.5 million for the fourth quarter and $296.4 million for the first full year of sales. The average analyst expectations for GW Pharmaceuticals was for the company to report a net loss of $0.75 per share in the fourth quarter. 

However, Wall Street was not pleased because they didn’t make progress this quarter towards profitability. They posted a net loss of $24.9 million, or $0.07 per share.   

ACB shares . Year-to-date, ACB has declined -32.87%, versus a -7.57% rise in the benchmark S&P 500 index during the same period.

About the Author: Aaron Missere

Aaron is an experienced investor who is also the CEO of Departures Capital. His primary focus is on the cannabis industry. He also hosts a weekly show on YouTube about marijuana stocks. Learn more about Aaron’s background, along with links to his most recent articles. More...

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