Some people may envision the legalization of marijuana as an opportunity for someone like Philip Morris to start selling marijuana cigarettes. It’s much closer to the truth to say that marijuana is showing potential for medical uses, and companies that are developing medical applications for the plant stand to gain in the marketplace. (See also: Top 4 Marijuana Stocks for 2017.)
The rush to get in on the marijuana craze has created hundreds of startups. The odds are that many of these will fail. The winners so far are established companies that are adding marijuana to their focus.
We have selected four marijuana stocks that have the potential to make significant gains in 2017. These stocks were chosen based on their array of marijuana-related products. These products are either in use or awaiting FDA approval.
All figures are current as of April 18, 2017.
1. AbbVie Inc. (ABBV )
This is a pharmaceutical company that is ahead of the pack because it has a cannabis-based drug on the market. The FDA approved Marinol, which helps alleviate nausea or vomiting for chemotherapy patients. The drug also helps AIDS patients who have lost their desire to eat.
It is important to note that Marinol is not the AbbVie’s flagship drug. In fact, it is not even the company’s biggest seller.
ABBV has reported increasing revenues in the past four years. In addition, its operating income has been increasing steadily. The company is benefiting from a host of useful drugs, including Marinol. This is a way to play the marijuana trend without incurring 100% exposure to the plant.
The risk of owning AbbVie is that it concentrates almost exclusively on United States markets. Most pharmaceuticals market internationally. If the domestic market falters, ABBV could see a drop in value. For investors, this risk is offset by the dividend, which is nearly 4%.
- Avg. Volume: 6,653,441
- Market Cap: $104.44 billion
- EPS (TTM): 3.63
- Dividend & Yield: 2.56 (3.91%)
- Ex-Dividend Date: N/A
2. GW Pharmaceuticals (GWPH)
GWPH develops drugs based on cannabis. While it is working on several drugs, its shining star is Epdiolex. This drug is designed to treat seizures in infant epilepsy.
Epdiolex is in late-stage studies. It has been found to also treat another form of epilepsy that affects children who are older than infants. FDA approval should come in 2017.
Investors must decide two things: 1) whether the drug will have significant sales, and 2) whether the FDA will grant approval. As of now, the stock has been rising on hopes that the cannabis-based drug will succeed, but there is no guarantee of that.
GW Pharmaceuticals’ revenues have been declining for four years, and operating income has followed suit. This is a case of investors expecting a turnaround based on one drug.
- Avg. Volume: 347,119
- Market Cap: $2.95 billion
- EPS (TTM): -3.21
- Dividend & Yield: N/A
3. Scotts Miracle-Gro Company (SMG)
An interesting way to play the marijuana boom is Scotts Miracle-Gro. Known for its lawn and garden products, the company is developing products for cannabis growers. It is developing several pesticides for use on marijuana plants. This company’s products could be used to grow medicinal marijuana.
The stock has been in a sideways pattern since December 2016. This looks like a base that could be the foundation for a breakout. Such a breakout would no doubt come on the news that one of SMG’s pesticides was on the market.
Revenues have been declining for the past four quarters, and the company is showing negative operating income. This could be one to watch instead of one to buy for now.
- Avg. Volume: 458,058
- Market Cap: $5.59 billion
- EPS (TTM): 5.37
- Dividend & Yield: N/A
4. Corbus Pharmaceuticals (CRBP)
This stock has seen some dramatic ups and downs over the past year. Hopes rise and fall for its marijuana-based drugs, which are in clinical trials. Resunab, which is designed to treat sclerosis, has had promising trials.
The stock has tended to dip just before trial results are announced, then rally when the results are positive. Now Corbus is testing Resunab as a treatment for cystic fibrosis. The pessimism/optimism pattern will continue to play out as this drug is tested yet again.
The company has negative operating income, and revenues are close to zero. Corbus is a company depending on the success of a single drug that could make or break it.
- Avg. Volume: 1,223,695
- Market Cap: $361.03 million
- EPS (TTM): -0.49
- Dividend & Yield: N/A
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The Bottom Line
As people sober up about the marijuana craze, the reality of using it in medicines will set in. Like any other source for drugs, cannabis has positive prospects and some failures.
It is best not to invest based on enthusiasm over marijuana, and keep a level head about actual results from drug trials. The pesticides angle is interesting, but such a product would have limited sales until marijuana is legalized nationwide. (See also: Former Trump Aide Roger Stone Wants Legal Marijuana.)