This post is brought you by Invictus MD.
2016 was a critical year for the cannabis industry as eight out of nine new states passed some form of legalization of marijuana. At the time, many cannabis stocks spiked on the good news, only to get slapped back into reality by the appointment of Jeff Sessions as Attorney General and negative comments from White House spokesman Sean Spicer.
The Spicer effect caused the Marijuana Stock index to fall approximately 8% following his comments about recreational marijuana. This has made some investors pretty nervous to get involved with these stocks. The cannabis industry though, has been chugging along with a business as usual attitude. This recent pullback has created some opportunities for cannabis investors that are not frightened away by the rhetoric coming out of Washington. Here are the top five cannabis stocks that could break out in 2017.
5. Zynerba Pharmaceuticals (NASDAQ: ZYNE) is up over 200% for the past year, so it would seem as if the company has already had a nice run. However, it is down from its 52 week high of $23.75 and was recently trading at $20.32. The company reported its fourth quarter and year-end results last week. Even though Zynerba reported a loss, it still beat analyst estimates. Zynerba has two positive aspects to its story. First, it uses a synthetic cannabis compound , so it doesn't “touch the plant.” This keeps it safe from a crackdown on cannabis and it doesn't have access to cannabis plants. It also makes it an appealing investment for people that want to participate in the cannabis market, but are still nervous about investing in a product that could be a target for the Justice Department. Secondly, the company is expecting phase two study results for its core drug this summer.
According to Yahoo Finance, there are 8 analysts covering the company and all rate the company with either a buy or strong buy rating. The average target price among the analysts is $32.25. Most recently Maxim Group initiated coverage with a buy rating. Jefferies analyst Biren Amin also has a buy rating on the stock and a $32 price target. Amin believes that by 2030, U.S. sales will equal $569 million and that is only including the epilepsy patients. Peak sales could get to $2.3 billion. Amin estimates that a Phase III study trial will begin in 2017 and assuming positive data , the filing the occur in 2018 and with FDA approval a launch could happen in 2019.
4. Invictus MD (OTC: IVITF or TSXV: IMH)is another up and coming Canadian cannabis company that recently moved from the Canadian Securities Exchange to the TSX Venture Exchange, which is similar to the U.S. Over-The-Counter exchange. The company primarily invests in cannabis companies, which it then spins out for profit purposes. Invictus sold Sunblaster lighting out of its Future Harvest holding for a 316% return, which allowed the company to pay a C$1 million dividend to its shareholders in 2016. It is focused on two verticals within the cannabis industry. Starting in the licensed producers sector with an investment in AB Laboratories and another option to acquire Acreage Pharms. It is also has a 82.5% ownership in the fertilizer and nutrient company Future Harvest.
Invictus raised C$12 million this past December. In March, according to the company, it closed a $16.21 million deal through Canaccord & Eventus Capital. This is a very speculative, early stage stock. It is difficult to find audited financial statements, so investors will be relying on the company's future ability to receive licenses and cultivate and sell its marijuana or be able to spin off acquired businesses.
3. Axim Biotechnologies (OTCMKTS: AXIM) is another biotech that uses cannabinoid-based products. It is a microcap company that is valued at $17 million and while the stock is up over a thousand percent for the past year, it has dropped from its year's high of $19.80 and was recently trading at $13.85. So far no main stream research analysts are covering the company or rating it. Investors should also be aware that it is late in filing it latest quarterly earnings. Chief Executive Officer Dr. George Anastassov said it should be filed by May 17 and he says the company has enough funding to carry it through this discovery and development phase.
“We have been focused on the pharma side of the business and not the consumer, but we may have to try to support the pharma with some consumer business,” said Dr. Anastassov. He said the company is talking to groups from Israel and So. America for product development. Its latest news is that it will be testing a bioequivalent of Marinol, the first FDA approved cannabis drug in the form of chewing gum. Axim Biotech is the maker of marijuana-based chewing gum, will use its technology for one of the largest pharmaceutical ingredient suppliers in the world.
1. Kush Bottles, Inc. (OTCMKTS: KSHB) With the increased demand for cannabis products, there has been an increase in the need for packaging. Each state has specific requirements for packaging in order to keep the products out of the hands of children. Kush Bottles, Inc. makes packages, supplies and accessories for cannabis producers. It primarily sells into the B2B market of legal medical and adult-use businesses. This includes indoor and outdoor grows, plus medical and adult-use dispensaries and edible manufacturers. Business is so good that they are moving to a new larger, more centrally located fulfillment center in Garden Grove California.
Azer also covers Kush and has an outperform rating on the stock. Azer believes it is the best opportunity in the consumer staples space to capitalize on the cannabis industry. She gives it a $4.50 price target and the stock is currently selling at $2.54, down from its 52 week high of $5.00. Still, the stock is up 17% for the past year.
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