2 Weed Stocks to Buy Now, Analysts Say

ACB and HEXO stocks scored new "buy" ratings at Desjardins

Andrea Kramer
Apr 26, 2019 at 10:43 AM
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Weed concern Aurora Cannabis Inc (NYSE:ACB) is higher today, as traders digest the company's new licensing agreement for EnWave's patented drying technology. In addition, ACB and fellow cannabis concern Hexo Corp (NYSEAMERICAN:HEXO) both scored fresh "buy" ratings from analysts at Desjardins Securities. The brokerage firm sees "numerous growth drivers and industry catalysts," including the legalization of edibles and the entry of major players like Constellation Brands (STZ) and Walgreens Boots Alliance (WBA) that "should help push cannabis and hemp into the mainstream."

Analysts Split on ACB Shares

Desjardins believes Aurora Cannabis "should emerge as a major international player." However, prior to today, only four brokerage firms followed ACB stock, with analysts split between "buy" and tepid "hold" ratings.

There could be room for more bullish initiations, should the shares extend their recent rally. In 2019 so far, ACB has added nearly 84%, with pullbacks contained by its 40-day moving average. More recently, since notching a year-to-date high above $10 in March, the security has consolidated right around the $9 level. Its Bollinger Bands are narrowing, which could signal an imminent breakout in either direction. At last check, the shares were 0.2% higher at $9.09.

Recent option buyers are apparently betting on higher highs for ACB. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio sits at 8.67, indicating traders have bought to open nearly nine Aurora Cannabis calls for every put in the past two weeks.

Options Traders See Higher Highs for HEXO

Meanwhile, Desjardins said "HEXO stands out with the best potential upside and cheap valuation." It's not the first brokerage firm to wax optimistic on the shares, though, as all nine analysts following the stock consider it a "buy" or better.

HEXO shares debuted on the Big Board in mid-January, and today notched a record high of $7.53 out of the gate -- taking out their previous high of $7.32 tagged in mid-March. Options traders today are rolling the dice on even more upside, with more than 3,000 calls exchanged in the first hour of trading -- four times the norm. It appears speculators are buying to open the May 7.50 call, which is the most active HEXO option so far.


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