Shares of Youngevity International Inc. (NASDAQ:YGYI) were down 23.5% as of 10:56 a.m. EDT on Wednesday. There was no news from the California-based multilevel marketer. So why did Youngevity's share price tank?
Perhaps the best explanation is that when major marijuana stocks sneeze, Youngevity catches a cold. Several large marijuana stocks tumbled on Wednesday as the Canadian recreational marijuana market opened for business for the first time. Youngevity's entrance into the cannabidiol (CBD) beverage market appears to have tied the stock's fortunes to the rest of the cannabis industry.
Should Youngevity's share price drop just because Canadian marijuana stocks are falling? Not really.
However, Youngevity stock has soared over the past few weeks, with the gains driven by the company's entrance into the CBD market. What goes up because of the cannabis opportunity can go down because of the cannabis opportunity.
The interesting thing, though, is that any letdown associated with the launch of the Canadian recreational marijuana market has absolutely no bearing on Youngevity's prospects. Canada hasn't legalized cannabis-infused beverages yet. That won't come until next year at the earliest.
Investors shouldn't dwell too much on the big swings by Youngevity -- either up or down. They're fueled primarily by a focus on the short term rather than the long term.
The primary thing to watch with Youngevity is the company's financial performance. Youngevity reports its third-quarter results in November. In its last quarter, the company posted modest year-over-year revenue growth but with a net loss of $656,000.
It's possible that Youngevity's launches of new CBD products will help spark financial improvement. However, investors are better off waiting to see for sure before buying Youngevity on its big pullback.