NEW YORK: Some cannabis stocks are seeing their prices surge as investors hunt for winners in the ashes of an industry shakeout that hammered share prices last year.
Investors are now betting that some of these companies have become undervalued. Canopy, for instance, trades 10per cent below the average target price among the 22 analysts that cover it, according to Refinitiv data. Its forward price-to-sales ratio, meanwhile, is at 16.4, well below its peak of 32.1 it hit in January 2019 and more than double its low from November.
Underhill’s fund owns shares of Canopy and is increasing its stake in companies such as CBD beverage maker Alkaline Water Company Inc , cannabis financing company Ianthus Capital Holdings , and multi-state cannabis operator Harvest Health & Recreation Inc .Others are focusing on companies that are not pure plays on cannabis, which they expect to better weather a tough regulatory environment in the U.S.
"Investors have realized that the rollout from a regulatory perspective isn't as efficient as it should be," said Jason Wilson, who focuses on cannabis research and banking at ETF Managers Group, which manages the US$810 million ETFMG Alternative Harvest ETF.