At the start of 2019, a lot of marijuana stocks soared. However, MedMen Enterprises and Auxly Cannabis were not included in this list. The share price of MedMen only increased by 3% this year and Auxly is down by 12%. Yet, despite their weak performances, both companies are actually showing significant growth potential. But which between these two cannabis stocks will pick up better for the long-term? Read on to find out!
The lackluster performance of MedMen Enterprises has resulted in the company being embattled with controversies that include a lawsuit filed by the company’s former CFO. MedMen was also embroiled in issues concerning the company’s promotional efforts. Yet none of these controversies have actually impacted the company’s long-term prospects.
The company is considered to be one of the biggest retailers of cannabis in the United States and is especially going strong in the state of California, where they have beaten several well-known cannabis retailers in terms of revenue. And although California is known as the biggest market for legal cannabis in the US, the state actually had a rough start in the previous year after launching the recreational cannabis market. However, there are now 33 states in the US that consider medical cannabis legal. This figure is expected to increase and this can be a great opportunity for MedMen Enterprises to grab.
Auxly Cannabis was included in the list of the top cannabis stocks in 2018, despite it being one of the worst performing cannabis stocks. And while the share price of Auxly has plummeted by more than 50%, the company’s market cap has soared by 48%. This surprising gap is actually a result of the company’s move to issue new shares, which diluted the value of the company’s existing shares.
It’s also possible that the dilution of Auxly’s stock price could lead to substantial growth for the future. They ended up issuing new shares in an effort to increase their capital and to help fund the company’s future deals. Auxly has provided capital to a number of cannabis companies and in return, was given royalty streams. In some instances, the company has directly invested in various cannabis businesses and has sometimes bought these outright. These streaming deals could increase Auxly’s production capacity this year. Given Auxly’s $350 million market cap, the company still has significant growth potential.
Which Marijuana Stock is Better?
Auxly Cannabis may have a better chance over MedMen Enterprises. And that’s because the company’s various investments may slowly start to pay off. And when this happens, the stock of Auxly will eventually make a comeback, unlike MedMen. Nevertheless, both companies still remain unprofitable and may continuously issue new shares in order to raise capital, which may eventually result in dilution.
And although there’s a greater chance that Auxly Cannabis may be able to outperform MedMen in the long run, it’s still possible that there are far better stocks that investors should consider buying out there.