Cannabis Stocks Fell Friday, Analysts Say They are Still Overvalued

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Analysts warn that future price corrections are a real possibility for overvalued marijuana stocks

Cannabis stocks including Canopy Growth Corp TSE: WEED, Cronos Group CRON (TSE), and Aurora Cannabis Inc TSE: ACB fell on Friday, but not fell as far as Tilray Inc NASDAQ: TLRY. The stock crashed $53.53 per share, marking a 30.25 percent loss. Analysts say even after the leading stocks took a dip, Tilray and others are still overvalued.

It was the high volume of short sales and put option trading, say, analysts, that caused Tilray stock to start the weekend over 30 percent down. But evidence points to the stock as being vastly overvalued. On Wednesday, Tilray reached a high that was 340 times its estimated cash flows for 2020.

The same day Tilray stock reached $300, analysts called the stock the poster child of the cannabis bubble and priced it at $40. Tilray’s stock price inflation is attributed to the dueling issues of scarcity and urgency among investors, and it was not the only stock to suffer from the wake of those influences.

Though they continue to be recommended as strong buys across nearly all analyst reports, Canopy, Aurora, and Cronos are all currently priced higher than the Medium Valuation. Aurora was only slightly above its Medium valuation on Friday ($11.84 compared to $10.10), while Canopy Growth Corp was significantly above at $49.78 compared to a medium valuation of $39.02.

Of the leading cannabis stocks, only Alphira was priced loser than its medium valuation, $19.70 compared to $23.63. Both Aurora and Aphira are still trading within analyst valuation ranges while Canopy and Cronos are projected to outperform the market. Analysts warn that price corrections are a possibility for all four stocks.