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Buds & Duds: Stocks trade in the red but cannabis opportunity remains large, says analyst

Aurora's Ontario greenhouse sale could trigger massive writedowns, warns analyst

cannabis greenhouse
Aurora's Ontario greenhouse facility is up for sale for C$17 million

Cannabis stocks retreated on Monday as edibles, beverages and other derivatives hit Ontario shelves, signaling the beginning of “Cannabis 2.0” in Canada’s most populous province.

The North American Marijuana Index, which tracks the top cannabis stocks in the US and Canada, fell 1.8% at 117.1 points. Elsewhere, the Horizons Marijuana Life Sciences Index ETF lost 3.3% at C$8.24, while the OTCQX Cannabis index retreated 1.5% to 459.6 points.

Despite the sea of red across major indices on Monday, Morningstar analyst Kristoffer Inton told BNN Bloomberg that the cannabis opportunity remained large heading into 2020.

“In 2019 the pace of growth wasn’t fast enough for investors, but that doesn’t undermine the overall big opportunity that we expect to see especially with Cannabis 2.0 coming and the availability of alternative products other than flower,” Inton said in a Monday interview with BNN Bloomberg.

Buds

A few stocks bucked the trend on Monday by trading in the green.

CannTrust Holdings Inc (TSE:TRST) (NYSE:CTST) jumped 20% in Canada at C$1.68 and 12% in New York at US$1.22 on Monday. Research firm ValuEngine upped its rating on the stock to ‘Buy’, following a similar move by Zacks in mid-November.

The embattled firm saw heavy trading volumes on Monday morning, sending shares soaring.

Other stocks trading higher on Monday included MariMed Inc (OTCMKTS:MRMD), which was up 4.7% at US$0.84 after announcing that its Illinois dispensaries saw a significant uptick in sales on the first day of recreational pot sales in the state.

Duds

Most stocks were down on Monday morning.

Aurora Cannabis Inc (TSE:ACB) (NYSE:ACB) pitched down 4.6% in Toronto at C$2.48 and 4.5% in New York at US$1.91 on Monday morning.

News that the company listed its Exeter, Ontario greenhouse for sale sent shivers through investors worried that the move implies large writedowns on its assets.

Analyst Bill Kirk from MKM Partners wrote in a note Monday that he expects nearly C$2 billion worth of writedowns, with more divestitures likely to come.

Contact Angela at [email protected]

Follow her on Twitter @AHarmantas

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