3 Hemp Stocks Under $10
Retail investors are always on the lookout for lower-priced stocks that can help them build a small fortune. If a stock is priced at $2 you can buy 100 shares for just $200. There are several such cannabis and hemp stocks that are trading at low prices in the beaten-down marijuana space. What are 3 hemp stocks trading under $10?
Let’s take a gander at three such stocks that you can consider adding to your penny hemp stock portfolio. The stocks mentioned here have already lost considerable value in the last 18 months and are trailing the broader markets by a wide margin. However, if you’re not afraid of some risk and are betting on an inevitable turnaround in the pot sector, these hemp stocks might be worth picking up if you’ve got a couple bucks to spare.
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The first stock on the list is Canadian cannabis cultivator Tilray (NASDAQ: TLRY). Is Tilray Stock a Buy? Tilray [stock_market_widget type=”inline” symbol=”TLRY” template=”basic” color=”default”] has been plagued by many of the same fundamental issues in the cannabis sector. Tilray continues to remain unprofitable, competes in several cannabis verticals, and has an overbuilt supply chain. Why would we consider a play here?
Tilray stock is currently trading at ~$6/share which is 70% below its 52-week high. The company has now increased its focus on the medical marijuana space and is conducting multiple clinical trials in collaboration with medical centers and universities. Medical marijuana products are legalized in over 40 countries all over the world and Tilray has an opportunity to expand offerings if and when clinical-stage trials are approved for widespread usage.
In the last 12-months, Tilray sales are about $200 million. Comparatively, its cost of sales is significantly higher at $236 million while its operating expenses stand at $208 million. Tilray aims to achieve profitability by the end of 2020 but it looks like a far-fetched dream given its unsustainable gross profits.
In order to improve liquidity, the company has raised $227 million in equity capital in the last 12-months, substantially diluting shareholder wealth.
Should I Buy TLRY?
Tilray has a huge presence in international markets of Europe and has a 2.7 million square feet cultivation space in Portugal. This will help it distribute medical marijuana products across the EU without having to pay tariffs giving the firm a significant cost advantage. With a median price target of $8.50 and a high-end estimate of $15 – we think there might still be a play here for this penny pot stock. Thus, it makes our list for the 3 Hemp Stocks Under $10.
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The next stock on our “3 Hemp Stocks Under $10” list is Hexo (NYSE: HEXO). Shares are currently trading at [stock_market_widget type=”inline” symbol=”HEXO” template=”basic” color=”default”] which is 70% below its 52-week high. Hexo has also raised capital multiple times in recent months which has impacted its stock price. Additionally, the COVID-19 pandemic and the structural issues plaguing hemp stocks have resulted in a prolonged bear run for Hexo and peers.
While Hexo is a low-priced stock, it carries the risk of delisting from the New York Stock Exchange. According to NYSE’s listing rules, a stock needs to be trading above the $1 price for 30 consecutive trading days. Hexo received a delisting notice from the NYSE in May 2020 and has until the end of the year to push its stock price to over $1.
Will Hexo Get Delisted?
In case Hexo loses its listing status, it will have to move to the OTC exchange which will mean lower liquidity for investors. Additionally, institutional investors will also lose interest which will make it difficult for Hexo to raise additional capital which could really hurt the long term prospects for Hexo. Aurora Cannabis underwent a reverse split a few months back and it seems Hexo will soon follow suit.
Last year, Hexo acquired Newstrike Brands and its Niagara cultivation facility for an undisclosed amount. This allowed the pot stock to boost its production capacity and focus on high margin cannabis 2.0 products. However, earlier this year, Hexo sold its Niagara facility for CA$10.25 million and reduced output in its Gatineau facility as well due to lower than expected demand.
In the first nine months of 2020, the company managed to double its gross sales to $74 million, up from $38.7 million. However, due to oversupply issues, the company also wrote-off $112 million in goodwill and another $42 million in unsold inventory. But is HEXO pot stock a buy? At less than $1 per share, Hexo stocks can be the most affordable investments in your cannabis stock portfolio. On the whole, the cannabis market is far from its peak meaning that an investment in Hexo now can save you big bucks while you wait for the stock to recover. Thus, it makes our list for the 3 Hemp Stocks Under $10.
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The third stock on our 3 Hemp Stocks Uner $10 list is Aurora Cannabis (NYSE: ACB). Shares of this pot heavyweight are currently trading at [stock_market_widget type=”inline” symbol=”ACB” template=”basic” color=”default”] and have lost 91% of value in the last 12-months. Aurora stock has also diluted investor wealth in the last two years and written-down billions of dollars in goodwill which suggests it has grossly overpaid for acquisitions.
In the June quarter, the company reported $34.7 billion in EBITDA loss and claimed it should be profitable by the December quarter of 2020. However, according to industry analysts, Aurora Cannabis might take another three years to report a positive EBITDA.
In the last few months, Aurora has closed five small cultivation facilities, sold a 1 million square feet greenhouse facility, and ceased construction in two large projects. This means the company’s peak annual capacity has now fallen to about 220,000 kgs compared with a peak capacity of over 600,000 kgs in the last year.
Is ACB Still a Good Investment?
Aurora’s price is low and we may see a recovery in the near future. However, over the long-term, we don’t see this as a good cannabis or hemp stock buy. The company continues to struggle with its losses, it’s engaged in a very competitive marijuana market in Canada, has inadequate capitalization issues, and continues to dilute shareholder value. If you have the stomach for it, only invest in this one for short term gains – otherwise, steer clear of Aurora Cannabis.
Why Consider These 3 Hemp Stocks Under $10?
We can see why the three stocks have generated abysmal returns to shareholders. Many cannabis companies continue to grapple with oversupply and a tepid demand environment. While the cannabis space is still growing and maturing it has attracted multiple players due to massive potential for long-term growth.
In the upcoming decade, investors can expect several cannabis and hemp firms to go bankrupt or get acquired by larger competitors and undergo consolidation, similar to what took place during the dot com bubble.
Only a few cannabis and hemp stocks will be solid long-term performers for investors. Will it be any of the aforementioned hemp stocks? That’s anyone’s guess but at least with these, the low cost of entry can be appealing for cannabis and hemp stock investors who might be a bit more risk-averse.
3 Hemp Stocks Under $10
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