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Why Aurora Cannabis, HEXO, Cronos Group, and Other Cannabis Stocks Surged Today

By Joe Tenebruso – Updated Jun 9, 2020 at 6:50AM

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Could this be the next industry to rebound?

What happened

Marijuana stocks soared on Monday, as investors grew more optimistic about the cannabis industry. Many of the largest companies enjoyed sharp gains on the day, including:

  • HEXO (HEXO -2.04%), up 47.4%
  • Cronos (CRON -3.75%), up 21.5%
  • OrganiGram Holdings (OGI -3.79%), up 15.4%
  • Aphria (APHA), up 13.4%
  • Aurora Cannabis (ACB -2.40%), up 12.9%
  • Canopy Growth (CGC -1.80%), up 8.7% 

So what

Several factors likely contributed to the rally in cannabis stocks. Many investors view the stock market as expensive after its recent rally off its lows in March, and it's possible that bargain hunters are setting their sights on the beleaguered marijuana industry. Even after today's gains, many of these stocks are still well below their all-time highs. That could make some of the strongest marijuana companies intriguing to investors who are more value-focused.

A cannabis leaf.

Cannabis stocks rose sharply on Monday. Image source: Getty Images.

It's also possible that some investors are beginning to see cannabis stocks as defensive investments. If more people turn to marijuana as a way to ease their stress during the current economic downturn, cannabis stocks could rally even if the market as a whole were to fall. Moreover, if social protests lead lawmakers to legalize marijuana in more states, cannabis stocks could rally further.

Additionally, Aphria began trading on the Nasdaq stock exchange today, which could be helping to bring more attention to pot stocks.   

Now what

Despite their recent gains, cannabis stocks remain relatively high-risk investments. Most are unprofitable, and only a select few, such as Canopy Growth and Cronos Group, have strong balance sheets. Others, like Aurora Cannabis and HEXO, have been forced to dilute shareholders by selling stock in order to raise cash.

So while the cannabis industry as a whole has immense growth potential, investors should keep these risks in mind.

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

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Stocks Mentioned

Canopy Growth Stock Quote
Canopy Growth
CGC
$2.73 (-1.80%) $0.05
Aurora Cannabis Stock Quote
Aurora Cannabis
ACB
$1.22 (-2.40%) $0.03
Cronos Group Stock Quote
Cronos Group
CRON
$2.82 (-3.75%) $0.11
OrganiGram Holdings Stock Quote
OrganiGram Holdings
OGI
$0.87 (-3.79%) $0.03
HEXO Stock Quote
HEXO
HEXO
$0.17 (-2.04%) $0.00
Aphria Stock Quote
Aphria
APHA

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

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