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Why Canopy Growth, Cronos Group, and OrganiGram Soared Today

By Keith Speights – May 15, 2020 at 4:00PM

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They might want to send a thank-you note to Aurora Cannabis.

What happened

Shares of several top Canadian cannabis producers soared today after one of their peers, Aurora Cannabis (ACB -2.40%), reported better-than-expected fiscal 2020 third-quarter revenue growth after the market closed on Thursday. Canopy Growth (CGC -1.80%) stock was up 13.4% as of 3:38 p.m. EDT on Friday, while shares of Cronos Group (CRON -3.75%) and OrganiGram Holdings (OGI -3.79%) were up 10.3% and 13.5%, respectively.

So what

Investors now appear to be increasingly optimistic that the rest of the Canadian cannabis industry could also enjoy a turn for the better after a challenging period following Aurora's surprisingly positive results. Probably the best news for Canopy, Cronos, and OrganiGram from Aurora's Q3 update was across-the-board revenue growth.

Shadow of Canadian maple leaf on a pile of cannabis leaves

Image source: Getty Images.

Aurora reported 18% quarter-over-quarter sales growth in the Canadian adult-use recreational marijuana market. Its Canadian medical cannabis sales rose 6%. The company's international medical cannabis revenue skyrocketed 125%. But is this growth a clear sign of better days ahead for Canopy, Cronos, and OrganiGram? Not necessarily.

The solid recreational sales growth for Aurora stemmed in large part from the company's launch of a new value brand. While other companies have also introduced value brands, they aren't guaranteed to see the same level of success that Aurora has.

As for Aurora's huge international revenue jump, it resulted from the company's resumption of medical cannabis sales in Germany after having its license temporarily suspended. This obviously won't translate to stronger international prospects for the other cannabis producers.

Now what

Although a rising tide lifts all boats, it remains to be seen just how much the tide is actually rising for the Canadian cannabis industry. Some of the same problems that have plagued the industry in the past, especially a constrained retail infrastructure, are still issues. 

However, it's quite possible that Canadian marijuana stocks will rebound over the next few months. If concerns about the COVID-19 outbreak diminish and the Cannabis 2.0 cannabis derivatives market gains momentum, Canopy, Cronos, and OrganiGram could all enjoy a better year in 2020 than they had in 2019.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends OrganiGram Holdings. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Canopy Growth Stock Quote
Canopy Growth
$2.73 (-1.80%) $0.05
Cronos Group Stock Quote
Cronos Group
$2.82 (-3.75%) $0.11
OrganiGram Holdings Stock Quote
OrganiGram Holdings
$0.87 (-3.79%) $0.03
Aurora Cannabis Stock Quote
Aurora Cannabis
$1.22 (-2.40%) $0.03

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

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