buy the rumour sell the news. Valuation metricsSeeing as how most people here are buy and hold first timer investors, let me tell you about a concept called "buying the rumour, selling the news".
Its not a matter of whether or not the bill gets passed. the conservatives dont hold enough of the senate to trash the vote. the bill will get passed.
The real question is whether or not the traders will push the stock down and sell on the news. legilization news that is.
At this point its a 50/50 for 50% price correction either positive or negative. Currently most marijuana stocks are roughly 50% overvalued.
Asumming any of these companies can make 100 million in revenues, which i think is a reasonable valuation for these canadian producers like canopy and auroura and aphria.
multiply the revenues by 10 and add in the value of the hard assets.
You get a 4 dollar share price for aurora. havent done canopy or aphria yet. canopy will be valued at over 10 billion if its stock goes up 20%. Is canopy really going to produce over a half billion in revenues from the get go??
These stocks will converge back near their fundamental values. whether the market will sell of on the legilization news is anyones guess. Marijuana is a good long term growth market, and the stocks will make very good investments over the next 5 years+. But we must live in reality. the stocks are far more likely to touch lows before they start going up. the companies will need to prove revenue growth in order for the market to push the valuations any further from henceforth.
The stocks may pop up after legilization news hits, but unlikely to go past 20% gains, perhaps aurora could hit a technical resistance on the news, but it WILL sell off at some point post legilization, in the short term. i reccomend everyone trim their positions and await a lower entry point.
Whoever missed out on the november explosion missed out on the windfall gains. myself included. dont chase the stock, be prepared for selling to occur. stocks are likely to sell off after news.