GW Pharmaceuticals (GWPH) isn’t one of the more popular marijuana stocks out there.
Maybe that’s because, unlike Hemp, Inc. (HEMP) and Cannabis Science (CBIS), which are microcaps trading for mere pennies a share, this marijuana stock is less likely to be manipulated into megaprofits.
GWPH stock has a market capitalization of about $1 billion, the company trades on the Nasdaq for more than $60 per share, and it actually has clinically tested medicines based on marijuana instead of just hyped up marketing claims.
It is not an exaggeration to call GWPH stock the most legitimate marijuana stock that is out there right now.
Of course, that doesn’t mean I would recommend buying GW Pharmaceuticals; being a legitimate business doesn’t guarantee you success — and even if it did, success doesn’t guarantee the stock will go up.
GWPH stock has exploded in the last year, up about eightfold from spring 2013. But unfortunately, its valuation is based more on hope than anything since the company continues to operate in the red as it hopes for results to materialize from its drug pipeline.
Its one and only product, the marijuana-based drug Sativex, has been approved in several countries to treat multiple sclerosis patients, but as of yet, it is not approved in the U.S.
Other marijuana-based treatments hold promise as cancer pain therapies, epilepsy treatments, and other medical applications … but there’s a long way between any current products and FDA approval for mass use.
GWPH is clearly a speculative marijuana stock, much like other biotechnology startups that are banking on a big drug approval to make it.
The bulls will insist that this makes GW Pharmaceuticals a much safer investment than other marijuana stocks, because it is simply following the same path like so many other small-cap pharma plays.
However, keep in mind that comparison is coming at a rather unfortunate time after biotech stocks have crashed hard in 2014. Stocks like Puma Biotechnology (PBYI), MacroGenics (MGNX) and Aratana Therapeutics (PETX) are all down roughly 25% or more since Jan. 1.
Among marijuana stocks, I’ll admit that GWPH has less risk than microcap penny stocks in the space since it’s more aligned with the general nature of Nasdaq-listed biotech startups.
But given how these picks have performed, that doesn’t necessarily guarantee it is a money-making marijuana stock.
It could just be the next biotech to flame out.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP.