Wednesday morning started out on a volatile note, as early losses gave way to a fast recovery, with market participants struggling to read the tea leaves on the trade front. Antagonism remains evident between the U.S. and China, but reports that the U.S. might be willing to delay some of the most recent new tariffs on Chinese goods spurred some enthusiasm. By 11:30 a.m. EDT, the Dow Jones Industrial Average (DJINDICES:^DJI) was up 110 points to 25,642. The S&P 500 (SNPINDEX:^GSPC) gained 16 points to 2,850, and the Nasdaq Composite (NASDAQINDEX:^IXIC) rose 78 points to 7,813.

Earnings season is past its peak, but a couple of prominent marijuana stocks reported their latest results, pulling investors' attention to the cannabis market. Tilray (NASDAQ:TLRY) and Aurora Cannabis (NYSE:ACB) are both big players in marijuana, and their quarterly reports reveal a lot about how the industry looks right now and what you have to do to be successful investing in it.

Hand holding marijuana leaf with rows of cannabis plants behind.

Image source: Getty Images.

Tilray heads lower

Shares of Tilray fell 5% after the cannabis company reported its first-quarter financial results. Revenue nearly tripled from the first quarter of 2018, with the company benefiting dramatically from the legalization of recreational cannabis throughout Canada late last year. About a third of Tilray's sales came from the adult-use market, with another third coming from domestic medical marijuana and the rest coming from cannabis-containing food products and its international medical marijuana business.

Tilray saw production and sales volumes jump. The pot producer sold more than 3,000 kilos of marijuana during the quarter, up from just 1,300 kilos 12 months ago. Acquisitions also played a key role in Tilray's growth, with the purchase of natural foods and hemp producer Manitoba Harvest opening up new product lines for the company and the purchase of Natura Naturals helping Tilray boost its cultivation capacity.

That said, CEO Brendan Kennedy highlighted a problem that Tilray has faced: finding high-quality cannabis for sale. Kennedy believes that supply constraints will likely persist until late 2020 or early 2021, and even with efforts to build out facilities to ramp up its own production, Tilray won't be able to meet demand for a while.

For investors, the fact that Tilray lost more money than it did a year ago isn't surprising, given higher costs for marketing and growth-seeking initiatives. Yet the news does highlight that it'll take time for promising companies like Tilray to meet their full potential even if things keep going well in the marijuana space.

Aurora goes big

Elsewhere among pot stocks, Aurora's shares were close to unchanged after its own release of quarterly results. The company said that net revenue quadrupled during the fiscal third quarter of 2019 compared to year-earlier levels, with its marijuana-related sales getting split almost evenly between medical and recreational cannabis products.

Especially impressive were Aurora's production and sales volume numbers. Aurora grew almost 15,600 kilos of marijuana, up from just 1,200 kilos a year ago as the company's Aurora Sky and Bradford growth facilities reached full operational capacity. The company sold almost 9,200 kilos of the marijuana it grew, and it expects further growth toward the vicinity of 25,000 kilos for the fiscal fourth quarter.

Despite what it called "disciplined cost management," however, Aurora saw more red ink, including 36.6 million Canadian dollars in adjusted pre-tax operating losses and a GAAP loss of CA$158.4 million. Those numbers weren't quite as bad as they'd been three months ago, but they still show the long road the company has ahead of it to reach sustained profitability.

Aurora has high hopes for the future, with the intent to make new products and stay innovative. There's still plenty of opportunity in pot, but what it'll take for Aurora and Tilray to reap the rewards is to stay focused on their top prospects and work on beating out their rivals to gain loyal customers they can retain for years to come.