Why Marijuana Stocks Cronos Group, Canopy Growth, and Tilray Jumped Today Find out why cannabis investors were excited today.
Dan Caplinger (TMFGalagan) Oct 15, 2018 at 4:32PM
The stock market pulled back on Monday, with major benchmarks failing to build on the positive momentum from last Friday. Investors are looking forward to earnings season ramping up to full intensity, but ongoing turmoil in international markets seems to be holding back sentiment despite signs that the U.S. economy remains reasonably strong. Even on a pretty lackluster day, though, market participants were excited about the prospects for major new players in the cannabis industry. Cronos Group (NASDAQ:CRON), Canopy Growth (NYSE:CGC), and Tilray (NASDAQ:TLRY) were among the best performers. Here's why they did so well.
The one reason that sent all these stocks higher All three of these stocks have something in common: They all stand to benefit from Wednesday's effective date for legal sales of recreational cannabis product in Canada. Marijuana investors have looked forward to Oct. 17 for a long time, and anticipation that the industry will bring in huge amounts of revenue from the Great White North has driven all three of these stocks higher over the past couple of months.
Some fear that the reality of legal recreational marijuana could prove to be less impressive than what investors expect, and that could lead to sell-offs for these stocks if it proves true. Yet for now, optimism still reigns supreme, and cannabis bulls think that these companies could all have further to climb.
News for cannabis companies
In addition to the broad-based interest in marijuana-related stocks, these three companies had some specific news items that raised awareness:
Cronos shares gained 19% after the company reported that it had entered into a partnership with a technology institute in Israel, under which researchers will look at the potential use of cannabinoids in support of skin health and to fight skin disorders such as acne and psoriasis. Canopy Growth jumped 14% after it said that it will acquire key assets of Colorado-based hemp research company Ebbu in a cash-and-stock deal, with the cash component amounting to less than $20 million but with Canopy giving up a whopping 6.2 million shares to Ebbu, worth about $300 million based on Friday's close.
Tilray subsidiary High Park Holdings announced three new brands for the Canadian market, including broad-based Canaca, Quebecois-focused Dubon, and northwestern-targeted Yukon Rove. Additional product lines include the Irisa brand of women's wellness products, as well as the Goodship and Wallops lines of edible cannabis items. Tilray stock closed up 11.5%. In the end, all three of these companies will have to prove that they can live up to the lofty expectations of marijuana investors and produce continuing sustainable growth. It'll take time to see how successful they are at achieving this goal, but for now, shareholders have high hopes that things will go well for the cannabis industry.
Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
AUTHOR Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.
Cronos Group Inc. Stock Quote
NASDAQ:CRON $11.74 up $1.88 (19.07%)
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Why Marijuana Stocks Canopy Growth, Cronos Group, and Tilray Crushed It Today
Excitement is mounting for the opening of Canada's recreational marijuana market on Wednesday.
Keith Speights (TMFFishBiz) Oct 15, 2018 at 4:28PM
What happened
The three Canadian marijuana stocks that currently trade on major U.S. stock exchanges enjoyed big gains on Monday. Shares of Canopy Growth (NYSE: CGC) were up 14% as of 3:48 p.m. EDT, while Cronos Group (NASDAQ: CRON) and Tilray (NASDAQ: TLRY) jumped 18.9% and 12.1%, respectively.
Two of the three marijuana growers reported new developments earlier in the day. Canopy announced an agreement to acquire all of the assets of Colorado-based hemp researcher ebbu, Inc. Cronos announced a deal with the Technion Research and Development Foundation of the Technion – Israel Institute of Technology to research the use of cannabinoids in skin diseases.
However, the primary catalyst for all three stocks appears to be mounting anticipation of the Canadian recreational marijuana market opening on Wednesday, Oct. 17. Canopy, Cronos, and Tilray will be major players in this new market.
So what
It certainly makes sense that investors are excited about the launch of recreational marijuana in Canada. Only one other country has legalized recreational marijuana nationwide -- Uruguay. Canada will become the first major economic power to allow the widespread legal use of cannabis for recreational purposes.
Canopy, Cronos, and Tilray have already carved out leading positions in Canada's medical marijuana market. All three companies have scrambled to boost their production capacity and secure supply agreements with provinces and territories to serve the recreational market.
Product shortages throughout Canada are expected by many as the recreational marijuana market opens. This would mean that the licensed cannabis producers will be able to sell all the product they can get their hands on. That's a good position to be in for Canopy, Cronos, Tilray, and their peers.
And while the other news from Canopy and Cronos wasn't as important of a factor in the stocks' gains today, the deals announced could be important over the long run. Canopy's agreement to buy ebbu is especially interesting.
Ebbu is a U.S.-based company. Canopy noted that the "transaction would not have been pursued were it not in clear accordance with current U.S. federal law." Because ebbu focuses on hemp research, it isn't breaking U.S. laws regarding marijuana. Canopy also stated that there wouldn't be any production or sale of products resulting from ebbu's research "unless and until it would be federally legal to do so."
The timing of when Canopy might be able to market hemp-based cannabidiol (CBD) products in the U.S. might not be as far off as many expect. Both the U.S. House of Representatives and the U.S. Senate have passed different bills that would allow hemp-based CBD products to be sold in states that allow such products without violating federal laws. So far, the differences between the two bills haven't been ironed out -- but there's a possibility that a final bill could be finalized and approved before the end of the year.
Now what
As exciting as Canada's recreational marijuana market opening this week might be for many investors, the real question is how well Canopy Growth, Cronos Group, and Tilray will perform down the stretch. As my colleague Sean Williams recently pointed out, there was "a short period of euphoria" in Colorado, Oregon, and Washington after the states' recreational marijuana markets opened, but prices dropped afterward.
And while there could be product shortages initially in Canada, it's only a matter of time before supply exceeds demand. When that happens, the fortunes of Canopy, Cronos, and Tilray will hinge on markets outside of Canada.
Plenty of unknowns remain for the major Canadian marijuana growers. But there's at least one certainty: This is an enormously important week -- not just for Canopy, Cronos, and Tilray, but for the entire cannabis industry.
Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
