What happened

Shares of Aphria (NYSE:APHA), Canopy Growth (NYSE:CGC), and Tilray (NASDAQ:TLRY) were sinking by 13.8%, 9.9%, and 12.6%, respectively, as of 3:15 p.m. EDT on Thursday. All three felt the brunt of a general sell-off of Canadian marijuana stocks after HEXO (NYSE:HEXO) announced disappointing preliminary fiscal 2019 fourth-quarter revenue and withdrew its outlook for full-year fiscal 2020.

So what

Did HEXO's bad news really impact Aphria, Canopy Growth, and Tilray enough to warrant today's big declines? Yes and no.

Three red lines with arrows pointing down, with one cracking through pavement

Image source: Getty Images.

HEXO stated that it expected to report net revenue between 14.5 million and 16.5 million Canadian dollars when it announces its results for the quarter ending July 31, 2019, on Oct. 24. This range is well below the company's guidance.

But HEXO's dismal results seemingly shouldn't matter all that much for Canopy Growth and Tilray, both of which have already reported results for their quarters ending June 30, 2019. Aphria could be a different story, since its last reported quarter ended on May 31, 2019.

However, investor worries about Aphria, Canopy Growth, and Tilray likely stemmed from HEXO's statements about "uncertainties in the marketplace" that caused it to withdraw its fiscal 2020 outlook. The company specifically mentioned slow launches of retail cannabis stores, the prospects of restrictions for some types of cannabis derivative products in the forthcoming Cannabis 2.0 market, and "early signs of pricing pressure."

All these factors directly impact the major Canadian cannabis producers. Nearly all of the big cannabis producers have spoken of the delays in Canadian provinces launching retail cannabis stores, although many have also noted that the situation was improving. Aphria, Canopy, and Tilray are counting on the Cannabis 2.0 market providing a nice boost to sales; any big obstacles for this market could derail those hopes.

Among the big players, Aphria is arguably the most insulated from these issues, because it makes most of its revenue from the medical cannabis and pharmaceutical distribution business of its CC Pharma operation in Germany. Canopy Growth and Tilray, on the other hand, like HEXO, still depend heavily on Canadian marijuana sales.

Now what

We should soon at least get a hint if there's truly a reason to worry. Aphria is scheduled to report results for its fiscal 2020 first quarter, which ended on Aug. 31, 2019, on Oct. 15. The details on Aphria's recreational marijuana sales in Canada could confirm that the problems mentioned by HEXO are affecting the Canadian cannabis industry on a broader scale.

Continuing health concerns related to vaping could present the most serious challenge. Most of the major Canadian cannabis producers have placed big bets on launching vaping products in the Cannabis 2.0 market. Should Health Canada or individual provinces limit the sale of these products, the downturn for these stocks will intensify.

In some ways, investing in marijuana stocks is riskier than it's ever been. The hype of potentially huge markets has given way to the realities of doing business in an unpredictable environment. HEXO's latest update could be the canary in the coal mine. Or it could be much ado about nothing. We'll soon find out which is the case.