While the cannabis industry has generated significant momentum lately on legalization hype and growing demand for cannabis products, uncertainties surrounding the potential for federal level legalization could limit the industry’s growth prospects. Keeping this in mind, we believe investors should avoid financially weak cannabis stocks Cronos Group (NASDAQ:CRON) and GrowGeneration (NASDAQ:GRWG) that have lost more than 10% in price over the past week. Read for an explanation.The cannabis revolution is gaining traction as the legalization of recreational and medical cannabis accelerates. So far, 19 states have allowed the cultivation and use of recreational cannabis. However, while most cannabis companies are well-positioned to profit from the expanding domestic and foreign marijuana markets, some appear to have lost momentum due to strong competition in the industry.
Furthermore, the cannabis industry’s prospects appear to be uncertain owing to the Senate’s disagreement over the decriminalization of marijuana at the federal level. The Cannabis Administration and Opportunity Act, floated by Senate majority leader Chuck Schumer last month, which would remove marijuana from the Controlled Substances Act, does not yet have sufficient supporters in the Senate.
Amid this uncertainty, we think it would be wise to avoid fundamentally weak cannabis stocks Cronos Group Inc. (CRON) and GrowGeneration Corp. (GRWG). These two stocks have declined more than 10% in price over the past week.