GW Pharmaceuticals Kicks Back Up After Morgan Stanley Buys The Bottom
April 25th, 2014
There is very limited coverage of marijuana stocks by Wall Street analysts, leading any initiations of coverage to attract quite a bit of attention by the media.
Many of the “pot stocks” trade in the “pink” sheets and for good reason. They have disclosed very little information and what they have disclosed does not qualify them to be listed on any of the major exchanges.
However, the best in breed might very well be GW Pharmaceuticals (NASDAQ: GWPH). GW is a British bio-pharmaceutical company known for its multiple sclerosis treatment product, Sativex nabixmois. Sativex is the first natural cannabis plant derivative to gain full market approval in any country.
The company distinguishes itself in the sector by providing a medical treatment for a serious ailment. While many other companies are focused on production for distribution or different ways to consume the product, GW is focusing its research efforts on the treatment of spasticity due to multiple sclerosis and other neuropathic pains.
Buying The Top
One of the first major Wall Street firms to initiate coverage was Bank Of America and its timing could not have been worse.The issue had more than doubled since January 1 when Bank of America on March 11 initiated coverage on GW Pharmaceuticals with a Buy and a $93.00 price target.
Guess when GW made its all-time high and sharply reversed course? After a peak close on March 12 at $83.05, it was trading under $50.00 one month later. Hopefully the firm was employing a tight stop loss for its customers, based on the limited upside to their target price.
It should be noted that since that dreadful call, Bank Of America has not commented on the stock or changed its ratings.
Buying The Bottom
On the other hand, Morgan Stanley initiated coverage of GW on Tuesday morning with an Overweight rating and announced a $103.00 price target.
This carefully planned initiation came after the issue had bottomed on April 15 at $41.86. Furthermore, it had distanced itself from that level and put in a series of three higher lows and closed over four points from that level on Monday at $46.04.
The “shorts” were leaning the wrong way in the issue and were forced to cover their positions following a series of halts and negative press on the sector. The buying frenzy began during pre-market trading and nudged GW over $50.00 by the 9:30 a.m. opening bell.
That’s when the real buying kicked into full gear. GW had added almost another 12 points by 10:30 a.m., changing hands at $61.80.
Jim Cramer’s highlighting of the issue on CNBC during this same period added to the furious rally. After finally peaking at $65.97, GW has retreated to the $62.00 level. This is the highest level for the issue since March 26 ($67.20).
Most importantly for GW bulls, this rally is taking place on monster volume. The issue, which averages a meager 417,000 shares per day, has already traded nearly six million shares as of 2:30 p.m. on Tuesday. A breakout move and huge volume may indicate a long-term low has been made in the issue. Any further declines will also be met with buying by shorter-term scalpers and longer-term buyers attempting to a build a position in the issue.
Investors looking to purchase this volatile issue may want to explore the options markets, as it could provide ways to participate if the rally continues while limiting losses to the original investment. History has shown that buying on the margins in GW is not recommended, as the pre-market and after-house swings in the issue can be enormous.
To learn more about the expanding cannabis financial industry, check out the 420 Investor on Marketfy.
This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.
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