Cannabis has proved its immense scope in the biopharmaceutical industry, with companies actively investing in developing a strong portfolio. Apart from its medicinal benefits, it sees high demand in the recreational sector as a psychoactive drug.

However, this industry is a new and evolving space that continues to struggle with changing regulations and legal barriers globally. Marijuana remains illegal under federal and many state laws, with a penalty of imprisonment for a year for mere possession and up to a lifetime on its sale. Moreover, with the recreational use of marijuana being heavily taxed and regulated in states where it's legalized, this industry still faces a stigma of a ‘stoner culture,’ thus limiting its near-term growth prospects.

Although the Canadian cannabis market has witnessed significant growth over the past few years, given the industry headwinds, we think Canadian cannabis stocks Tilray Brands, Inc. (TLRY), Canopy Growth Corporation (CGC), Aurora Cannabis Inc. (ACB) should be avoided at all costs.

Tilray Brands, Inc. (TLRY)

Headquartered in Leamington, Canada, TLRY engages in the research, cultivation, production, marketing, and distribution of medical cannabis products in Canada and internationally. It operates through four segments Cannabis Business; Distribution Business; Beverage Alcohol Business; and Wellness Business. 

For the fiscal fourth quarter ended May 31, TLRY’s gross profit stood at negative $6.73 million, down 70.1% year-over-year. Operating loss for the period increased 534.3% from the prior-year quarter to $467.42 million. Net loss per share increased 136.8% from the same period the prior year to $0.90.

The consensus revenue estimate of $158.56 million for the fiscal first quarter ended August 2022 indicates a 5.6% year-over-year decline. Analysts expect its EPS to come in at a negative $0.07 in the same quarter.

The stock declined 71% over the past year to close the last trading session at $3.89.

TLRY’s POWR Ratings reflect this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

TLRY has a Momentum and Sentiment grade of F and a Stability and Value grade of D. In the F-rated, 167-stock Medical - Pharmaceuticals industry, it is ranked #165.

Click here to see the additional POWR Ratings for TLRY (Growth and Quality).

Canopy Growth Corporation (CGC)

Headquartered in Smiths Falls, Canada, CGC engages in producing, distributing, and selling cannabis and hemp-based products for recreational and medical purposes. It operates through segments, Global Cannabis and Other Consumer Products. 

On July 18, CGC announced the closing of the previously announced exchange transaction of its 4.25% unsecured notes due 2023 to reduce its debt obligations by approximately $263 million.

For the fiscal quarter ended June 30, CGC’s revenue decreased 20.9% year-over-year to C$122.86 million ($95.45 million). The gross margin came in at a negative C$1.39 million ($1.08 million). The company’s operating loss came in at C$1.84 billion ($1.43 billion), up 879.3% from the prior-year period.

Street revenue estimate of $90.98 million for the fiscal quarter ending September 2022 reflects a 13.8% year-over-year decrease. Its EPS estimate of negative $0.20 million indicates a decline of 2,147.6% year-over-year in the same period.

The stock slumped 77% over the past year to close the last trading session at $3.96.

It’s no surprise that CGC has an overall F rating, which translates to Strong Sell in our POWR Ratings system. The stock also has an F grade for Momentum and Value and a D for Stability, Sentiment, Quality, and Growth. In the same industry, it is ranked #166.

To see the POWR Ratings for CGC, click here.

Aurora Cannabis Inc. (ACB)

Headquartered in Edmonton, Canada, ACB produces, distributes, and sells cannabis and cannabis derivative products in Canada and internationally. 

For the fiscal third quarter ended March 31, 2022, ACB’s total net revenue decreased 8.6% year-over-year to $50.43 million. Cash balance declined 7.6% from the prior-year quarter to $480.55 million, while adjusted EBITDA stood at a negative $12.26 million.

Analysts expect ACB’s EPS to come in at a negative $0.10 for the quarter ending September 2022, indicating a decline of 99.8% year-over-year. The consensus revenue estimate of $40.81 million represents a decline of 15.5% year-over-year in the same quarter.

ACB’s shares have declined 77.4% over the past year and 57.4% over the past six months to close the last trading session at $1.62.

ACB’s poor prospects are reflected in its POWR Ratings. The stock has an overall D rating, equating to Sell in our proprietary rating system. ACB has a Momentum and Sentiment grade of F and a Stability and Quality grade of D. It is ranked #141 in the Medical - Pharmaceuticals industry.

Click here for the additional POWR Ratings for Growth and Value for ACB.

TLRY shares were trading at $3.77 per share on Tuesday morning, down $0.12 (-3.08%). Year-to-date, TLRY has declined -46.37%, versus a -15.40% rise in the benchmark S&P 500 index during the same period.

Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.

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