After a rough end to 2018, pot stocks have been doing well so far this year with big names up substantially year-to-date.
What’s different about this year though, is that it seems the bubble has already popped for pot stocks. Last year, investors piled into pot stocks leading up to the October 17 nationwide legalization of marijuana in Canada.
When the day finally came, pot stocks dropped in a big way as investors “sold the news,” and continued to slide through the end of the year. But then sentiment began to normalize to a less euphoric level and marijuana stocks began to stabilize at key technical levels.
If in fact, the bubble has popped, we should see more stability in the sector moving forward, which is good news for pot stocks.
The three I’ve got my eye on now are names you may not have heard before, but each is doing something interesting in the space.
Here’s what you need to know about these three stocks.
Amyris (NASDAQ: AMRS)
You may not have seen Amyris (NASDAQ: AMRS) discussed on a list of pot stocks before, but the company inked a new deal this week that plants it firmly in the American marijuana space.
The renewable products company signed a $255 million deal—as well as the potential to receive royalty payments—with an unnamed partner for the development, licensing, and commercialization of cannabinoid products. Products from the deal are expected to appear on shelves within 18 to 24 months after the final approval of the deal.
Some of that $255 million bounty will be paid upfront, with the remainder earned for hitting specific milestones within the next one to three years. That’s pretty exciting considering the company had a market cap of $240 million as of Monday’s close.
Prior to its entrance into the CBD space, Amyris was a little-known industrial biotech. The company had its IPO in 2010, but after peaking in 2011 has lost roughly 99% of its value. But this cannabis deal could help Amyris make a major comeback. In fact, it has already helped the stock gain some traction as shares jumped as much as 84% on Tuesday after the announcement.
Aside from the new association with the marijuana boom, Amyris has also shown improvement on its financials in the past couple of years, as it more than doubled revenues in 2016 and then again in 2017. And with new sales from the CBD space soon to be coming in, it’s likely both earnings and revenue will improve significantly.
Analysts’ average price target for AMRS is $9.50, suggesting possible upside of nearly 75% over the next twelve months. Earlier this week, HC Wainwright issued a Buy rating for the stock and set their price target at $11 – 102% higher than Thursday’s closing price.
Canopy Growth (NYSE: CGC) spun Canopy Rivers (TSXV: RIV.VN, OTC: CNPOF) off as a cannabis investment platform that invests in companies that could one day work with Canopy Growth. This week, Canopy Rivers announced its plans to raise $85 million from investors, including a $30 million investment from its parent.
Both of these stocks have had a great year so far, but Canopy Rivers has been the bigger winner, with shares having gained 94% in January. So far, the company has invested in such companies as Headset, Greenhouse Juice Co., Canapar, and Herbert, a brand platform that’s focused on the cannabis beverage and edibles market.
While cannabis beverages and edibles are not yet legal in Canada, regulations are expected to be finalized this year. As such, Canopy Rivers believes that the investment in Herbert could pay off well once the market for beverages and edibles opens up later this year.
In a statement this week, Canopy Growth said it would be increasing its stake in Canopy Rivers to 27.4%, up from 26.5%. “By increasing Canopy Growth’s investment in Canopy Rivers, we are demonstrating our interest in growing great companies, developing selective opportunities and delivering Canopy’s shareholders more growth,” said CGC’s Chief Executive Bruce Linton.
The average price target for RIV is C$11, indicating possible upside of 139.13% over the next twelve months.
Zynerba Pharmaceuticals (NASDAQ: ZYNE)
Zynerba Pharmaceuticals (NASDAQ: ZYNE) should be considered more of a marijuana-adjacent stock as it’s a biotech that happens to be working on what it says is “the first and only pharmaceutically-produced CBD formulated as a permeation-enhanced gel for transdermal delivery.”
While the cannabis-based therapies space is getting increasingly crowded—with GW Pharmaceuticals (NASDAQ: GWPH) leading the pack—Zynerba is worth a look.
The biotech’s ZYN002 CBD gel candidate is being studied for treatment for a range of conditions, including Tourette’s, seizures, and Fragile X syndrome, a rare condition—for which there are no FDA-approved treatments—caused by a DNA defect.
With ZYN002, Zynerba is focused on the treatment of seizures in patients with Fragile X syndrome. In a presentation delivered at the end of last month, the company said that things are moving along as planned in its Phase 2/3 CONNECT trial for Fragile X syndrome, and expects to meet with the FDA in the second half of this year to determine acceptability of its data as a basis for a New Drug Application (NDA) filling. Zynerba also said that it is “evaluating opportunities for FDA fast-track, breakthrough status, and/or priority review.”
In addition to having an interesting drug candidate in ZYN002, Zynerba is also in a decent financial position with $59.8 million in cash. The biotech is positioned well in a hot sector, and has catalysts coming up this year, with one just around the corner. Next week, CEO Armando Anido will give a presentation at the 2019 BIO CEO and Investor Conference, and any new data releases or business updates in his presentation could produce big moves in the stock.
The average twelve-month price target for ZYNE is $19.67, suggesting possible upside of 266.92%. Late last year, Cantor Fitzgerald rated the stock a Buy and gave a price target of $21 – 291.8% higher than Thursday’s closing price.