The marijuana industry in the U.S. market is still waiting for legislation that will make the use of marijuana legal in the federal state. For now, most U.S. states have legalized the use of medical marijuana.
The question to ask is whether it worth is waiting for this important decision as it is highly uncertain in terms of when and it will occur.
Having marijuana illegal in the federal state is bad business for the plethora of marijuana companies and in this article, we present three marijuana stocks to sell as they do not present any appealing reason to buy them.
The odds for these stocks moving lower are high as the stock market is struggling to find a direction. Below are three marijuana stocks to sell:
| OGI | OrganiGram Holdings | $1.19 |
| VFF | Village Farms International | $3.25 |
| ACB | Aurora Cannabis | $1.7 |
OrganiGram Holdings (OGI)
OrganiGram Holdings (NASDAQ:OGI) throughout 2022 has been a penny stock with losses of 40% as of Jul.8, 2022. The OGI stock will soon witness added volatility as the company will report third-quarter 2022 financial results on July 14.
The Q2 2022 earnings report was a mixed one with EPS GAAP of -$0.01, in-line with expectation, and revenue of $25.19 million that was a miss by-$70.39K. The estimates for Q3 2022 are for EPS GAAP of -$0.02 and revenue of $26.21 million.
The company had a super growth in sales in 2018 and in 2019 with figures of 130.64% and 546.98% respectively, but ever since revenue growth slowed down and in 2021 the company reported a negative sales growth.
The business is losing money for the past three consecutive fiscal years and consistently is burning cash. In 2019, 2020, and 2021 the free cash flow was -$148.83 million, – $126 million, and -$42 million respectively. The shareholders have been diluted in the past year, with total shares outstanding growing by 5% which is another negative factor.
Village Farms International (VFF)
Village Farms International (NASDAQ:VFF) has losses of nearly 49% in 2022 and in theory, someone could argue its business model is strong based solely on its revenue trend.
Pay attention to the words, with emphasis on the word solely. In 2020 and in 2021, the company reported revenue growth of 17.65% and 57.58% respectively. This trend indicates robust demand for its products.
However, looking at the profitability of investors would be worrisome as in 2021 with surging sales growth the firm posted a net loss of $9.08 million. The expenses have been consistently increasing and this is not good news. I am referring to selling general and administrative expenses. This trend of course is not favorable as it puts a lot of pressure on operating income and profit and then on the net profit.
The free cash flow trend is also highly problematic as on a yearly basis, it is mostly negative and in 2021 the firm burned $61.22 million while it made sales of $9 million. If this cash burn continues, then Village Farms International has less than a year of cash runway.
Shareholders have been diluted in the past year, with total shares outstanding growing by 9%. This amount is not immaterial at all and is another negative factor to consider.
Aurora Cannabis (ACB)
Aurora Cannabis (NASDAQ:ACB) has lost approximately 68% of its value year-to-date. Could it now bottom soon? Not so fast. The sales growth has been slowing down after increasing too fast in 2018 and in 2019. In 2021 we saw negative revenue growth and the firm in the period 2019-2021 has been losing money.
The biggest problem for Aurora Cannabis is that you cannot get optimistic when you analyze its very poor free cash flow trend. Burning cash for the past five consecutive years has been destroying its valuation.
On top of this, the shareholders have been substantially diluted in the past year, with total shares outstanding growing by 50.3%.
This is a very important stock dilution that combined with negative free cash flow explains why the shares of ACB is indicative of one of the marijuana stocks to sell.
On the date of publication, Stavros Georgiadis, CFA did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.