The Canadian marijuana stocks we’ve dug up could be undervalued based on their relative strength index (RSI)
SmallCapPower | August 6, 2019: The relative strength index, or RSI, is an indicator measuring the degree of recent price changes. RSI is used to evaluate overbought or oversold conditions in the price of an asset. Generally, RSI is considered overbought when above 70 and oversold when below 30. Traders often use RSI as a potential indicator towards what direction an asset’s price might move. If a stock is overbought, that means that analysts or traders believe it is trading above its intrinsic value. If a stock is oversold, analysts or traders believe it is trading below its intrinsic value and has the potential for a price bounce. Today we’ve found four oversold Canadian marijuana stocks: cannabis stocks with an RSI below 30 on a basis of their 7-day RSI and 14-Day RSI.
*Share prices as at close Thursday, August 1, 2019, data obtained from S&P Capital IQ
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Canopy Growth Corporation (TSX:WEED) – $41.34
Cannabis
Canopy Growth is the largest cannabis company listed by market cap on the TSX and NYSE. The Company has the largest licensed production platform in Canada, with over 600,000 sq. ft. of production space. The Company has also secured the necessary agreements to export medicinal cannabis to Australia, Brazil, and Germany. On July 10, Spectrum Therapeutics, the medical division of Canopy Growth, announced a partnership with the Canadian Mental Health Association (CMHA). This initiative will see the CMHA, in collaboration with Spectrum Therapeutics, develop an educational content module related to cannabis in the workplace as part of the CMHA’s Not Myself Today workplace mental health program. Visit Canopy’s corporate website for more information.
- Market Cap: $14.3B
- YTD Return: 5.2%
- 90 Day Average Trading Volume: 1,770,000
- 7-Day RSI: 14.9
- 14-Day RSI: 24.0
Aphria Inc. (TSX:APHA) – $6.90
Cannabis
Aphria produces and sells medical and adult-use, cannabis-derived extracts in Canada. The Company has a 1,100,000 sq. ft Leamington greenhouse facility that yields 100,000 kg per year. On August 1, Aphria Inc reported its results for the fourth quarter and fiscal year ended May 31, 2019. These results featured net revenue of $128.6M in the fourth quarter, an increase of 75% from the prior quarter. Notable, the Company more than doubled its kilograms sold from the previous quarter, selling 5,574kgs of cannabis relative to 2,637kgs in the previous quarter. APHA also posted a net income of $15.8M and adjusted EBITDA of $0.2M in the fourth quarter, an increase of 114.6% and 100.8%, respectively, from the previous quarter. Visit Aphria’s corporate website for more information.
- Market Cap: $1.7B
- YTD Return: -15.3%
- 90 Day Average Trading Volume: 2,040,000
- 7-Day RSI: 16.0
- 14-Day RSI: 23.1
Aurora Cannabis Inc. (TSX:ACB) – $7.78
Cannabis
Aurora Cannabis is a vertically-integrated and horizontally-diversified cannabis company based in Edmonton, Alberta, which currently has a funded capacity that exceeds 625,000kg per year. The Company has sales operations in 25 countries across five continents. As of now, the Company has 18 strategic acquisitions, 15 global production facilities with 3 EU GMP certified, 40 clinical studies running or completed and over 77,000 medical patients served. On July 18, 2019, the Company announced that it was selected by the Italian government to be its public tender to supply medical cannabis in Italy. With the contract, Aurora will supply a minimum of 400kg of medical cannabis over the two-year contract. On July 15, 2019, Aurora announced that it received Health Canada licenses for outdoor cultivation in Quebec and British Columbia. Visit Aurora’s corporate website for more information.
- Market Cap: $7.9B
- YTD Return: 9.7%
- 90 Day Average Trading Volume: 4,520,000
- 7-Day RSI: 16.7
- 14-Day RSI: 25.3
Cronos Group Inc. (TSX:CRON) – $16.78
Cannabis
Cronos Group is a globally-diversified and vertically-integrated cannabis company that has a presence in five continents. The Company has two wholly-owned Canadian licensed producers: 1) Peace Naturals Project Inc., a global health and wellness platform; and 2) Original BC Ltd., a recreational adult-use Canadian licensed producer that is located in Okanagan Valley, BC. Cronos’ business strategy is to focus on building an international iconic brand portfolio in addition to developing its intellectual property. On July 11, Cronos Group Inc announced that it has entered into an agreement to acquire an 84,000 square foot GMP compliant fermentation and manufacturing facility in Winnipeg, Canada from Apotex Fermentation Inc. The facility will operate as “Cronos Fermentation” and comes with fully-equipped laboratories as well as two large-scale microbial fermentation production areas. Visit Cronos Group’s corporate website for more information.
- Market Cap: $5.6B
- YTD Return: 9.0%
- 90 Day Average Trading Volume: 930,000
- 7-Day RSI: 18.0
- 14-Day RSI: 29.6
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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