Flashback to 2018 and the cannabis industry was booming with uncontrollable excitement. Penny stocks were surging to record highs. Primarily, because Investors saw the cannabis market as a megatrend with major upside potential and did not want to miss out. However, 2019 has brought a storm upon the Australian cannabis industry. Leaving many investors frustrated, disappointed, and without the eye-watering returns that were forecasted in 2018. Three cannabis stocks that have been wrecked by the 2019 bearish trend include AusCann (AC8), Elixional Global (EXL), and CannGroup Ltd (CAN).
During 2019 AusCann Group Holdings Ltd (AC8) has plummeted by 74%. Auscann’s collection of licenses, a high level of integration across the supply chain, and the recent appointment of Aspen Pharmacare to package its medicinal cannabis products might appear bullish. However, the oversupply of cannabis, forecasted weaker demand, and Marco risks resulted in investors moving away from the cannabis market. The loss in investor confidence was highlighted when Canopy Growth sold its entire 13% stake. With revenue at non-meaningful levels and unprofitability being a constant negative, investors have moved their cash to less risky stocks in 2019.
Despite the fundamental negatives if AusCann could bring their hard-shell capsules to market, then the company’s current financial nightmare would transform into a healthy financial position.
Key 2020 events for AusCann
- Results from Phase 1 clinical trials for proprietary hard shells – Q2 2020
- Develop new and differentiated cannabinoid pharmaceutical dosage combinations – Q1/Q2 2020
- Hardshell capsules to be made commercially available for physicians to prescribe through the Special Access Scheme – Q1/Q2 2020
- Generate a data report from the feedback from clinical trials and outcomes of hard shells in special Access Scheme – End and Q2 2020 and into Q3 and Q4
Elixinol Global Ltd (EXL) has fallen by 88% since its high of $5.64 back in April this year. Elixinol Global started strong. With the expansion into Europe, New Zealand, and Japanese markets, the acquisition of IP rights for microencapsulation technology to improve CBD quality and the launch of both Sativa skincare into health stores and Hemp burgers into Woolworths. However, the success behind EXL took a turn for the worst in recent months.
First, Elixional Global announced that Elixinol Japan was selling illegal hemp-derived CBD. Consequently, EXL’s reputation is damaged, the company expects the sales of EXL Japan to be a loss of $2.2million. Moreover, the news impacts EXL’s ability to negotiate for future licenses. Stock brokerage firm Bell Potter reflected the decline in investor confidence by dropping their position from buy to hold and decreasing their valuation from $2.35 to $1.11.
Cann Group Ltd (CAN) plummets by 80% throughout 2019. CAN’s plunged is share price because of the decision to change the construction of the Mildura facility into a 3-stage approach. Also, the current oversupply of cannabis and CAN’s unprofitability contributed to the plummet.
However, under CAN’s recent deal with Symbion, Australian wholesaler of healthcare services, Symbion will distribute CAN’s imported cannabis through the Special Access Scheme. Also, CAN has an excellent understanding of the genetic makeup of cannabis through partners Aurora and Anadia. Thus, improving the forecasted revenue potential for Q3-Q4 of 2020.
Key 2020 events for CAN
- Product development and validation on track from the domestic launch of local medicinal cannabis products – Q1 2020
- Symbions distribution of CAN’s products
- Construction of Milduria facility stage 1 – complete Q3/Q4 2020
Growing cannabis stocks
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The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Written by Associate of YIG, Patrick Mcloughlin