Please ensure Javascript is enabled for purposes of website accessibility

Why These Canadian Marijuana Stocks Plunged Today

By Keith Speights - Mar 6, 2020 at 3:58PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Aurora Cannabis, Canopy Growth, Emerald Health Therapeutics, and Village Farms went lower today on coronavirus concerns.

What happened

Several Canadian marijuana stocks plunged on Friday as worries about the novel coronavirus, COVID-19, caused the major market indexes to fall. Shares of the biggest Canadian cannabis producer, Canopy Growth (CGC 4.72%), were down by 10.5% as of 3:02 p.m. EST. Shares of Aurora Cannabis (ACB 7.75%) were sinking by 11.5%. Village Farms (VFF 4.86%) and Emerald Health Therapeutics (EMHT.F 24.14%) stocks were falling by 11.2% and 11.6%, respectively.

So what

What does the coronavirus outbreak and the spread of COVID-19, the disease caused by the novel coronavirus, have to do with marijuana stocks? Not very much.

Some companies that sell vape products manufactured in China could be impacted by disruptions to the country's economy. It's also possible that retail cannabis sales could be negatively affected if consumers choose to stay home due to fears about being infected by the coronavirus.

Cannabis leaf with arms and legs holding a thumb down

Image source: Getty Images.

Mainly, though, what we're seeing is investors' fear. They're concerned that the coronavirus outbreak could lead to an economic recession, so they're moving their money to cash and other assets that are viewed as safer than stocks.

Canopy Growth, Aurora, Emerald Health, Village Farms, and other Canadian pot stocks are being hit especially hard because they're not consistently profitable yet. These companies also face industry headwinds, including a slow expansion of retail cannabis stores in Ontario.

Now what

There's no way to know how long the overall stock market downturn will continue to drag down marijuana stocks. For investors who remain confident about the long-term prospects for the global cannabis industry, today's sell-off could be a buying opportunity.

But even if coronavirus fears wane, some marijuana stocks are better picks than others. The stocks of companies with stronger financial positions should be less risky than those of companies that could quickly run out of cash. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Canopy Growth Stock Quote
Canopy Growth
CGC
$3.77 (4.72%) $0.17
Aurora Cannabis Stock Quote
Aurora Cannabis
ACB
$1.53 (7.75%) $0.11
Emerald Health Therapeutics, Inc. Stock Quote
Emerald Health Therapeutics, Inc.
EMHT.F
$0.04 (24.14%) $0.01
Village Farms International, Inc. Stock Quote
Village Farms International, Inc.
VFF
$3.02 (4.86%) $0.14

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.