Because the cannabis industry has been making great strides of late in its journey toward legalization, more players are entering this space. But given the sector’s intense competition, not all cannabis operators are well-positioned to capitalize on the industry tailwinds. Therefore, we believe investors are better off avoiding fundamentally weak cannabis stocks HEXO (NASDAQ:HEXO), Flora Growth (FLGC), and Neptune Wellness (NEPT). These stocks declined more than 15% in price in October. Read on.The U.S. cannabis industry has been gaining steam due to the legalization of recreational marijuana in several states and a change in consumer preference toward innovative cannabis products. However, the health risks associated with cannabis use in adolescents raise questions related to marijuana consumption. Furthermore, the U.S. Food and Drug Administration has to date not approved cannabis as a treatment for cancer or any other medical condition.
Several challenges, including restricted access to capital and a stigma surrounding cannabis use, could impede the industry’s growth. On the other hand, with cannabis laws gradually becoming more favorable for the cannabis industry, more players are entering the space, making the industry increasingly competitive. Therefore, not all cannabis operators are well-poised to withstand the challenges and survive in the heavily competitive market.
Given this backdrop, it could be wise to steer clear of cannabis stocks HEXO Corp. (HEXO), Flora Growth Corp. (FLGC), and Neptune Wellness Solutions Inc. (NASDAQ:NEPT), which possess weak fundamentals. These stocks declined more than 15% in price in October.