Cannabis stocks are once again in the spotlight for investors, with a range of companies in this sector seeing big increases over the past week.
The list of cannabis companies shows extremely diverse year-to-date (YTD) returns, with roughly half the list currently trading down on the year and the other half seeing big gains.
However, among the most notable decliners on this list that's seen a big boost from President Trump's recently announced move to sign an executive order reclassifying marijuana as a less dangerous drug is Incannex Healthcare (IXHL).
Let's dive into what's driving this move and why this particular cannabis stock is seeing so much recent upside (up 22% in the past month and 86% in the past six months).
What's Driving This Move?
Incannex is a unique company in the cannabis sector. It acts as a clinical-stage biopharma company looking to advance not only medicinal cannabis medicines but also the development of various psychedelic therapies for patients outside the U.S. Thus, while this stock is listed on the Nasdaq as an ADR (a foreign form of stock ownership, typically held through Cayman Islands companies, and not technically direct ownership in the company, but that's an article for another day), Incannex's work in Australia in using both cannabidiol and hydroxychloroquine sulfate to treat rheumatoid arthritis, as well as developing an oral dose of other medicines for sleep apnea. So there are real-world use cases the company is trying to solve with its medicines.
Opening up cannabis for medical research could allow Incannex and other firms to carry out more of their research stateside. Doing so could bolster this sector in a big way. But the fact that the U.S. market is now open to looking at such experimental treatments is a good thing, as this is a massive potential market for the company.
Incannex's fundamentals shown above are indicative of this company's early-stage status. Indeed, Incannex and other similar clinical-stage stocks are nearly impossible to assess based on their fundamentals. That's precisely because they don't have any—these companies are in the business of raising investor capital for R&D in the hopes of hitting it big.
Trump's announcement just changed those probabilities in the company's favor, hence the stock price boost recently. Despite the potentially game-changing news, IXHL is still down about 80% YTD.
What Do Analysts Think of This Cannabis Name?
Overall, Wall Street analysts don't really have anything to say about this company. That's because Incannex has yet to receive coverage from any major analyst, so there's no price target to discuss. Given its current focus on international markets and its relatively microscopic market capitalization of just $139 million at the time of writing, this is a lottery ticket-style investment for small-cap investors.
Without a price target to work with or any meaningful fundamentals, investors are left relying on narrative and clinical trial releases from the company, which are ongoing and continue to come through. With some drugs at Stage 1 and Stage 2 of research, the potential for additional research to take place in the U.S. could bolster the company's ability to get FDA approval for its drugs for this incredibly profitable and essential market.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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