The Zacks Analyst Blog Highlights: Scotts Miracle-Gro, HEXO and Aurora Cannabis

For Immediate Release

Chicago, IL – July 7, 2020 – announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Scotts Miracle-Gro SMG, HEXO Corp. HEXO and Aurora Cannabis ACB.

Here are highlights from Monday’s Analyst Blog:

Get Ready for a “Green Rush” — 3 Must-Buys

It has been a rough year so far for marijuana stocks. In fact, in the trailing 15 months, a bulk of marijuana stocks lost 50% value, if not more. Marijuana stocks took a hit as the global economy came to a grinding halt amid the coronavirus pandemic.

But things are looking up for the cannabis industry in the second half of the year. The pandemic-hit market is slowly recovering, helping marijuana stock make a comeback. And whatever be the outcome of the upcoming U.S. presidential election, the legalization of weed at state level is not in jeopardy.

While dozens of states have proposed to legalize both medical and recreational marijuana, the New Jersey, Arizona, Mississippi and South Dakota states are expected to give the green signal as early as November.

Last year, New Jersey’s two legislative houses unanimously voted in favor of legalizing recreational marijuana in particular, in November. Monmouth University, in April, 61% of New Jersey voters were in favor of adult-use of cannabis. Similarly, a recent poll by Marijuana Moment showed that a staggering 65% of Arizona voters favor legalization of adult usage of marijuana, which is up from 54% support garnered last year.

Traditionally a more conservative state, Mississippi is now more likely to support the legalization of cannabis, in any form. In fact, when it comes to medical marijuana, nearly 67% of respondents have favored it, while 24% opposed per a survey conducted by Millsaps College and Chism Strategies at the beginning of this year.

Meanwhile, South Dakota also appears to be in favor of legalizing marijuana in some form. It’s because the state is one of the first to present a medical marijuana measure and a recreational initiative to voters at the same time.

By the way, racial injustice following the death of George Floyd has come into the forefront and experts believe that unequal enforcement of drug laws is an example of systemic racism. Thus, the need for marijuana decriminalization has increased by leaps and bounds. The Ohio Senate, in the meantime, approved a bill to double the amount of marijuana that is decriminalized in the state and at the same time lessen criminal penalties for many other drug-related crimes.

Last but not the least, decline in consumer outlays and mass layoffs amid the pandemic have resulted in less cash flow into federal, state and local tax coffers. However, legalizing marijuana could be a new source of employment and a way to increase cash flow for local communities. Thus, the requirement for marijuana legalization is now more than ever.

Talking about marijuana legalization, Canada has also legalized recreational marijuana in particular, with a number of dispensaries obtaining the permit to sell legalized cannabis. At the same time, mergers and acquisitions between large beverage, tobacco, pharma and cannabis companies should certainly help the weed market grow.

3 Marijuana Stocks to Play the Green Rush in 2H20

Like the rest of the broader market, the cannabis industry wasn’t immune to coronavirus. But it doesn’t mean it’s time to abandon pot stocks altogether.

With more states both in the United States and Canada expected to legalize marijuana, leading to more employment opportunities and calls for marijuana decriminalization growing louder, the cannabis industry is poised to bounce back in the second half. And these three marijuana related stocks are worth a buy among the industry – 

First on the list is Scotts Miracle-Gro. The company is known for offering products for pest control and growing plants in sand, gravel, or liquid. In this process, Scotts Miracle-Gro has become a major supplier to the cannabis industry that is dependent on its products to boost cultivation output.

Scotts Miracle-Gro is also well-poised to gain from the synergies of the Sunlight Supply acquisition. The company should also gain from the long-term prospects and cost-saving opportunities associated with its Hawthorne division. 

Scotts Miracle-Gro currently sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for its current-year earnings has risen almost 12% over the past 60 days.

The company’s expected earnings growth rate for the current year is 29.5%, in contrast to the Fertilizers industry’s projected decline of 1.1%.  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Meanwhile, traders currently view HEXO Corp. as one of the most affordable marijuana stocks available in the market. After the coronavirus outbreak, its shares declined considerably. On a year-to-date basis, the stock tanked 54.5%

But, why be optimistic now? This is because the company’s recent fiscal third-quarter results showed that its sales of products, including adult-use cannabis gram and gram equivalents, jumped 42% from the fiscal second quarter.

Hexo added that “newly launched products such as hash and oil extract drop also contributed to overall adult-use sales growth.” The producer and seller of cannabis currently has a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its current-year earnings has climbed 2.9% over the past 30 days.

The company’s expected earnings growth rate for the current year is 436.8% compared with the Medical – Products industry’s estimated rise of 2.1%.

Lastly, with a greater number of people using CBD to cure a variety of ailments, demand for cannabis has increased by leaps and bounds. And this is how Aurora Cannabis will benefit immeasurably. After all, Aurora Cannabis is one of the largest producers of cannabis.

Notably, market research firm Brightfield projected that CBD sales in the United States alone will reach a worth of $22 billion by 2022. And if we consider a more conservative estimate, the numbers are still encouraging. For instance, investment firm Piper Jaffray forecasted annual U.S. hemp CBD sales close to around $15 billion by 2023.

Nevertheless, Aurora Cannabis just reported a solid fiscal third quarter, which saw 2,729 kilograms of cannabis being sold, up 34% sequentially. 

Aurora Cannabis currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 1.3% over the past 60 days.

The company’s expected earnings growth rate for the next year is 92.9% compared with the Medical – Products industry’s expected rise of 24.4%.

The Hottest Tech Mega-Trend of All

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See Zacks’ 3 Best Stocks to Play This Trend >>

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Zacks Investment Research

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit information about the performance numbers displayed in this press release.

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