Because the cannabis industry has been gaining steam with increasing legalization, more players are entering this space. And given the heightening competition, not all cannabis operators are well-positioned to capitalize on the industry tailwinds. So, we believe investors are better off avoiding cannabis stocks Curaleaf (CURLF) and Aurora Cannabis (NASDAQ:ACB), which missed their sales estimates recently. So, let’s examine these names.The cannabis industry is attracting significant investor attention on hopes surrounding a GOP-led effort to legalize marijuana at the federal level. However, the health risks associated with cannabis use in adolescents raise questions about marijuana consumption. Furthermore, the FDA has approved only four cannabis drug products to date. There is no cannabis-based animal or food product that the FDA has approved. Also, there are numerous hemp-derived CBD products on the market that are not approved by the FDA for human or veterinary use.
Several challenges, including restricted access to capital and a federal criminal statute surrounding cannabis' production and distribution, could impede the industry’s growth. On the other hand, with cannabis industry laws becoming gradually more accommodating, more players are entering this space, making the industry highly competitive. So, not all cannabis operators are well-positioned to withstand the challenges and survive in a heavily competitive market.
Given this backdrop, we think it could be wise to avoid fundamentally weak cannabis stocks Curaleaf Holdings, Inc. (OTC:CURLF) and Aurora Cannabis Inc. (ACB). These companies have also missed sales estimates in their recently released results.