What happened

Shares of Canopy Growth (NYSE:CGC) were jumping 15% higher as of 11:51 a.m. EST on Wednesday, with two of its peers also enjoying nice gains. Aurora Cannabis (NYSE:ACB) shares were also up 15%, while shares of HEXO (NYSE:HEXO) rose 8.8% after vaulting as much as 14.8% higher earlier in the day.

There were several reasons for the upward moves for these Canadian marijuana stocks. Bank of America analyst Christopher Carey upgraded Canopy Growth stock to a buy rating from a neutral rating. This upgrade appears to have had a halo effect to some extent on Canopy's peers, especially Aurora and HEXO. In addition, Aurora announced on Tuesday that 94% of the holders of its convertible debentures that mature in March 2020 have elected to accept the company's offer to convert the debt into stock.

Three cannabis leaves

Image source: Getty Images.

So what

It's great that Aurora won't have to scramble to raise 230 million Canadian dollars to pay off its debt within the next few months. It's also encouraging that a top analyst is now more positive about Canopy Growth. But the underlying reason behind these three stocks' jumps today is that some investors now think that the sell-off from the last several months that's affected nearly every Canadian marijuana stock finally went too far.

One of the biggest culprits behind the dismal performance of these three stocks has been the lack of adequate cannabis retail infrastructure in Canada, especially in Ontario. However, this situation should improve significantly with Ontario's commitment to issue more retail licenses.

Canopy Growth has reeled from major adjustments related to product returns from the company shipping too many cannabis oil and softgel products. But the company should be in a position to move past these issues now.

HEXO's challenges appear to be more difficult to overcome. CEO Sebastien St-Louis recently stated that the company must gain a 20% market share in Canada to become profitable. Although HEXO is the leader in the Quebec adult-use recreational marijuana market, it has a long way to go in other provinces. Still, investors could be eyeing HEXO's current market cap of around $500 million and think that the company's prospects justify a higher valuation.

Now what

It seems likely that the financial performances of the leading Canadian cannabis producers will improve in 2020. As mentioned earlier, the number of retail stores in Ontario should grow significantly. The cannabis derivatives products market kicks off in earnest in mid-December when companies begin shipping products including beverages, edibles, and vapes. Canopy Growth and other Canadian cannabis producers will begin to generate sales in the U.S. CBD market. European medical cannabis markets should also continue to expand.

However, it remains to be seen if all of these positive developments will bear fruit quickly enough for Aurora, Canopy, HEXO, and their peers to sustain today's momentum. Expect a lot of volatility in the meantime.