Although it appears that the cannabis industry is on its way to going mainstream as more states forge ahead with the legalization of recreational cannabis use, there remain several uncertainties at the federal level that could limit the industry’s growth prospects. With this in mind, we believe investors are better off avoiding marijuana stocks Canopy Growth (NASDAQ:CGC), Aurora Cannabis (NASDAQ:ACB), and Neptune Wellness Solutions (NASDAQ:NEPT) for the time being based on their accelerating losses and weak fundamentals. Read on.The marijuana industry has been attracting significant investor attention lately as the push for federal-level legalization gains momentum and the stigma surrounding the use of pot declines. As of June 2021, recreational marijuana was legal in 19 states.
Despite overall optimism, pot legalization at the federal level still has few hurdles to cross. Last month, U.S. Senate Majority Leader Chuck Schumer released draft legislation of the Cannabis Administration and Opportunity Act, which would remove marijuana from the Controlled Substances Act. However, given that the bill does not yet have sufficient votes to push it through the Senate because some Republicans and moderate Democrats oppose the decriminalization of marijuana, the prospects of federal-level legalization look uncertain at best. Also, it is still unclear whether President Biden would sign the bill into law.
Amid this uncertainty, we think investors should avoid cannabis stocks with weak fundamentals and growth prospects. Canopy Growth Corporation (CGC), Aurora Cannabis Inc. (ACB), and Neptune Wellness Solutions Inc. (NEPT) are examples of cannabis concerns that are struggling to stay afloat due to their weak financials. Therefore, we believe these stocks are best avoided now.