GWPH Stock Predictions in 2019 (Buy or Sell?)

Marijuana, once reserved for back-alley “deals,” has gone mainstream. The long-sought normalization of marijuana laws is becoming a reality, spawning a huge industry that’s attracting entrepreneurs, venture capitalists and individual investors.

Marijuana is no longer a touchstone of the culture wars, nor merely a punchline from a hackneyed Cheech & Chong sketch. Marijuana is a multi-billion-dollar business that’s been growing by double-digit rates every year. Recreational and medicinal uses are booming, with the greatest opportunities in biotechnology.

GW Pharmaceuticals (NSDQ: GWPH), based in the United Kingdom, is perhaps the best-known marijuana biotech that’s developing cannabinoid medical treatments.

In this issue of Investing Daily, you’ll learn:

  • Why GW Pharmaceuticals gets so much attention.
  • GW Pharmaceuticals’ performance in 2017/2018.
  • Should you buy GW Pharmaceuticals?
  • Should you sell GW Pharmaceuticals?
  • Our final forecast and outlook for GW Pharmaceuticals in 2019.

Let’s get into the analysis!

gwph stock prediction

GW Pharmaceuticals: The “Big Pharma” of Pot?

GW Pharmaceuticals discovers, develops, and markets cannabinoid prescription medicines.

There’s a significant need for new painkilling medicines and cancer treatments that pharmaceutical giants such as Johnson & Johnson (NYSE: JNJ) and Merck (NYSE: MRK) aren’t meeting. That’s why GW Pharmaceuticals right now enjoys the greatest marijuana investment buzz (so to speak).

With a market valuation of $4.2 billion, G.W. Pharmaceuticals is one of the very few “weed companies” that isn’t a micro-cap, penny stock.

GWPH’s primary product is Sativex, an oromucosal spray for the treatment of multiple sclerosis, cancer pain and neuropathic pain. Sativex (scientific name nabiximols) was the first natural cannabis plant derivative to gain market approval in any country.

GW Pharmaceuticals also offers Epidiolex, which treats rare and resistant forms of pediatric epilepsy. The company has been marketing the breakthrough drug in more than 20 countries outside of the U.S., through partnerships with Bayer (OTC: BAYRY) and Novartis (NYSE: NVS).

Epidiolex received the stamp of approval from the U.S. Food and Drug Administration in June 2018. Now that it’s available in both the U.S and overseas, this drug is a potential blockbuster.

The company has other products in the pipeline, including therapies for glaucoma and schizophrenia, and a potential treatment for a particularly aggressive form of brain cancer.

How Has GW Pharmaceuticals Performed?

GWPH shares have gained 22.21% over the past 12 months, compared to a gain of 4.17% for the S&P 500; gained 14.61% over the past two years compared to a gain of 28.65% for the S&P 500; and gained 354.46% over the past five years compared to a gain of 51.51% for the S&P 500.

What Is GW Pharmaceuticals Stock History?

GW Pharmaceuticals has successfully launched several stock offerings to boost its balance sheet and finance its growing portfolio of marijuana-based medicines.

Whenever one of the company’s new drugs is approved or shows progress in clinical trials, the stock has (predictably) popped higher. Conversely, GWPH has demonstrated the same sensitivity to headline risk, such as adverse regulatory news, as its peers.

How Has GW Pharmaceuticals Performed In 2017/2018?

GWPH shares gained 17.47% in 2017, compared to a gain of 19.40% for the S&P 500. Year to date in 2018, GWPH has lost 1.61% versus a loss of 0.49% for the S&P 500.

Medicinal Mary Jane: GW Pharmaceuticals’ Top Rivals

The following three marijuana stocks are salient competitors to GW Pharmaceuticals. Keep in mind, any one of these small-caps would make an attractive takeover target for deep-pocketed GWPH.

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22nd Century Group (NYSE: XXII)

With a market cap of $294 million, this biotech focuses on genetic engineering and plant breeding and is developing a new strain of hemp with zero THC, the main psychoactive compound found in cannabis (the compound that produces the “high” that’s keeping marijuana illegal on a federal basis in the United States).

22nd Century Group also is creating genetically engineered tobacco plants with 97% less nicotine than conventional strains, as well as a strain high in nicotine that allows for the lowest tar-to-nicotine ratio in the cigarette industry.

The low-nicotine variety has proven effective in helping smokers kick the habit. At present, 22nd Century is the only company in the world capable of producing tobacco cigarettes at this extremely low level of nicotine, without having to use potentially harmful artificial extraction or chemical processes.

INSYS Therapeutics (NSDQ: INSY)

INSYS has been racing GW Pharmaceuticals when it comes to pediatric epilepsy treatments. But this biotech (market cap: $564 million) also has other products in its pipeline that could boost its shares exponentially when they receive approval.

The company is developing cannabis-derived drugs for easing opioid dependence and moderate-to-severe pain. But it has already received approval for Dronabinol, an orally delivered solution that eases nausea and vomiting associated with chemotherapy and AIDS, as well as eating disorders.

Zynerba Pharmaceuticals (NSDQ: ZYNE)

Zynerba is developing transdermal synthetic cannabinoid treatments for both pediatric and adult epilepsies, which puts the company in direct competition with GW Pharmaceuticals.

With a market cap of $91.6 million, Zynerba is considerably smaller than either GWPH, XXII or INSY, but that means ZYNE could still witness the explosive growth that the bigger firms have already seen.

However, because it’s smaller and lags the other three companies in the FDA approval process, Zynerba is the riskiest of the quartet.

Will GW Pharmaceuticals Go Up In 2019 (Should You Buy)?

One of the surest ways to make money over the long haul is to tap into a macrotrend that’s virtually unstoppable. That’s precisely what GW Pharmaceuticals has done.

The decades-long propaganda war on the cannabis plant produced generations of Americans who grew up convinced that marijuana was the “devil’s weed” only used by society’s misfits and criminals. That’s all changing.

As marijuana evolves from an underground vice to mainstream capitalism, a plethora of entrepreneurs are cashing in, not only by growing and selling pot but by creating branded edibles, “marijuana tourism,” vaping parlors, paraphernalia, shops, seeds, fertilizers, trade shows — you name it.

Let’s examine the political revolution that has fueled the rise of canna-business.

On October 17, 2018, Canada became the second country, after Uruguay, to legalize possession and use of recreational cannabis for all adults. Medical marijuana has been legal in Canada since 2001.

Canada has left it to the provinces and municipalities to determine parameters, such as where cannabis can be bought and consumed.

Analysts expect demand for marijuana to surge in Canada, creating an acute shortage. Scarcity of weed should be manna for marijuana investors.

Canada’s approach toward marijuana differs from that of its southern neighbor.

In the U.S., marijuana remains illegal on the federal level. However, individual states can adopt their own legal standards for marijuana thanks to Congress, which prohibits drug enforcement agents from pursuing marijuana growers and users in states where pot is legal.

The turning point occurred in 1996, when California voters agreed to allow patients and their caregivers to possess and cultivate marijuana for therapeutic purposes. Known as the California Compassionate Use Act, Proposition 215 created the country’s first open marijuana market. Prop. 215 spawned a flurry of state legalization laws, both medical and recreational, that have made possible a new industry.

In the U.S. to date, 30 states and the District of Columbia have legalized marijuana to some degree.

According to Ameri Research, the global legal marijuana market generated spending of $14.3 billion in 2016 and is forecast to grow at a compound annual growth rate of 21.1% between 2017 and 2024, culminating in 2024 revenue of $63.5 billion.

The following chart tells the story:

gwph growth

Arcview Market Research estimates that the recreational marijuana market will account for nearly 70% of that global spending by 2024, with medicinal treatments taking up the rest.

Over the long haul, the purveyors of recreational and medicinal marijuana offer the potential for outsized gains.

Just a few years ago, if someone had told you that it was possible to get rich by investing in marijuana, you probably would have laughed and asked what they were smoking. But the marijuana business is no laughing matter.

This video depicts the powerful industry tailwinds that benefit GWPH:

GWPH also enjoys the benefit of being a mid-cap stock. It’s small enough to offer outsized growth, but large enough to provide ballast. That puts this company in the valuation “sweet spot.”

GWPH’s total debt-t-equity ratio is a manageable 3.37, which is low compared to most of its peers which typically struggle with high debt.

On a trailing 12-month (TTM) basis, the company’s price-to-sales ratio is 259, which is a bit pricey compared to its peers but warranted considering its growth prospects.

Will GW Pharmaceuticals Go Down In 2019 (Should You Sell)?

The election of Donald Trump and his appointment of the notoriously anti-pot Jeff Sessions as attorney general have frightened away some investors who could be reaping marijuana stock profits.

While the majority of Americans now favors the widespread legalization of cannabis, it appears that the federal government’s stance won’t change in the immediate future.

Indeed, Jeff Sessions once quipped that he thought members of the KKK were “okay” until he found out that some of them were pot smokers.

Jeff Sessions, the highest law enforcement official in the land, despises marijuana to the point where his remarks about pot resemble a trailer for the camp classic Reefer Madness.

Investors with low tolerance for risk will have better luck with more established players in the cannabis-for-medical-purposes sphere.

Read Also: Our Amazon Stock Prediction

Overall GW Pharmaceuticals Forecast And Prediction For 2019

Marijuana investors should be prepared to shoulder the inevitable volatility that afflicts the industry.

That said, GW Pharmaceuticals is well-positioned to weather the shake-out that’s likely to hit smaller, less stable marijuana companies. The company boasts a solid balance sheet, manageable debt, a sizable market cap, a seasoned scientific staff, and FDA- approved products in the marketplace.

Many of the biotechs working in the marijuana industry use synthetic cannabinoids, allowing them to skirt around the legalities of grown marijuana. This is paying off big-time for GW Pharmaceuticals.

Even as the overall bull market wavers, GW Pharmaceuticals remains a momentum stock. The average analyst expectation is for GWPH’s year-over-year earnings growth to reach 42% in 2019.

The Wall Street consensus has set a one-year share price gain of more than 35% for GW Pharmaceuticals. Investors are likely to witness additional catalysts, notably regulatory approvals, that will boost GWPH shares well into 2020.

John Persinos is the managing editor of Investing Daily.