Cannabis stocks sunk lower on Monday, continuing the sector's downward trend as investors reeled from a series of high profile setbacks in the industry. William O'Neil and Co. cannabis analyst Andrew Kessner said that although a loss of momentum in the cannabis sector could dissuade more tentative investors from diving into the space, tempered valuations ー particularly in the U.S. and in second tier Canadian cannabis stocks ー could prove attractive.
"When you do see the weakness like this in the space, for many investors who have more of a momentum-driven methodology, it's tough for them to get in now. But if you really look at the valuations, there are, we think, a lot of attractive opportunities, particularly on the U.S. side," Kessner said.
Cannabis stocks were down across the board on Monday, with several major cannabis stocks, including Canopy Growth ($CGC), Aurora Cannabis ($ACB), and CannTrust ($CTST), down more than 1 percent. Cronos Group ($CRON) and Aurora Cannabis were both down just over 40 percent from 52-week highs ー and CannTrust down about 75 percent ー despite broader optimism in the market.
Kessner said recent high profile upsets in the cannabis industry have weighed on cannabis stocks and spooked institutional investors. In Canada, the ouster of Bruce Linton, and CannTrust's recent regulatory breach; and in the U.S., antitrust concerns and legalization setbacks in New York and New Jersey have all weighed on sentiment.
Linton, the former Canopy CEO, was ousted rather unceremoniously several weeks ago, following weak earnings results and comments by William Newlands, CEO of Canopy's largest shareholder Constellation Brands ($STZ), saying that he was "not pleased."