Some stocks from the cannabis segment received another shot in the arm as third-quarter fiscal 2021 results of
Canopy Growth
Corporation
CGC
renewed hopes of legalization of cannabis at the federal-level in the United States. The company stated on its earnings call that it is accelerating its U.S. growth strategy in anticipation of removal of the federal ban on cannabis products in the country.
The company believes that it can enter the U.S. THC market (Tetrahydrocannabinol or recreational cannabis) in 2021, following the related legislation during the upcoming congress. So far, cannabis is legalized for medicinal purposes in majority of the U.S. states. Some of these states have also legalized recreational cannabis. However, the use and possession of cannabis is illegal under federal law for any purpose. Removal of the federal ban in the United States will open a huge market for pot growers.
Canopy Growth rose 11.9% on Feb 9 following its earnings release. Riding the optimism following Canopy Growth’s earnings, other pot growers also increased during the day.
Tilray
TLRY
rose 40.7%,
Aphria
APHA
was up 25.1% and
OrganiGram Holdings
OGI
increased 32.4%. All three stocks were also up more than 20% in pre-market trading on Feb 10.
These cannabis stocks have gained significantly so far this year. While Aphria is up more than 450%, Tilray and OrganiGram have increased more than 150%. Shares of Canopy Growth have gained almost 90% during this period.
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U.S. Scenario
Cannabis stocks have been gaining momentum since the beginning of 2021 buoyed by hopes of wider legalization and near-term decriminalization as well as the growing adoption of marijuana in more states. Moreover, the Joe Biden-led administration has plans to expedite the legalization of marijuana at the federal level with friendliest political environment for the cannabis industries in U.S. history. (read:
3 Marijuana Stocks to Play the Green Rush in 2021
)
The acquisition-offer for British cannabinoid drug company
GW Pharmaceuticals
GWPH
from U.S.-based
Jazz Pharmaceuticals
’
JAZZ
earlier this month also suggest that there can be relaxation of several restrictions for cannabis industry going forward.
Other Potential Markets
Apart from the United States, other countries are also opening their markets for different varieties of cannabis. Earlier this week, Tilray entered into a new distribution agreement with Grow Pharma, a U.K. medical cannabis distributor. Some European countries have also legalized medical marijuana, which also represents an additional territory for revenue generation for pot growers. Recreational marijuana may become legal in these markets soon. Mexico is another country that also allowed pharmaceutical companies to research on medical marijuana, opening avenues for pot growers.
We expect industry players to benefit from the growing popularity of the cannabis products. While Tilray and Canopy Growth carry a Zacks Rank #3 (Hold), OrganiGram and Aphria carry a Zacks Rank #4 (Sell) and Zacks Rank #5 (Strong Sell), respectively.
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