What happened

Shares of Canopy Growth (NASDAQ:CGC) were sliding 6.7% lower as of 11:27 a.m. EDT on Wednesday. The Canadian cannabis producer announced earlier in the morning that it and Acreage Holdings (OTC:ACRGF) had implemented an amended agreement to clear the way for an acquisition of Acreage when federally permissible in the U.S. However, the more likely reason behind today's decline is that investors are souring on Canadian marijuana stocks after Aurora Cannabis (NASDAQ:ACB) reported dismal fiscal 2020 Q4 results Tuesday evening.

So what

It doesn't seem likely that Canopy's deal with Acreage is pulling the Canadian pot stock down. The amended agreement is better for Canopy than it is for Acreage, yet Acreage's share price isn't down nearly as much as Canopy's shares are today.

Gloved hand holding a cannabis leaf in front of a Canadian flag

Image source: Getty Images.

On the other hand, Aurora's ugly Q4 update appears to be weighing on most of the top Canadian marijuana stocks. But does Aurora's performance hint at problems for Canopy Growth? Probably not.

Aurora posted a quarter-over-quarter revenue decline, recorded a massive write-off for goodwill impairment charges, and provided disappointing guidance for fiscal 2021 Q1. Canopy, however, gave investors some reasons to be optimistic about the future in its latest quarterly update.

Investors shouldn't place too much emphasis on the volatility with Canopy's share price. What really matters is how the company executes on its strategy to deliver revenue growth and make progress toward achieving profitability.

Now what

It will be another couple of months before Canopy announces its fiscal 2021 Q2 results. But there's another potential catalyst on the way before then: the U.S. elections in November.

The outcome of those elections could be critical in how soon marijuana legalization occurs at the federal level. If Democrats regain control of the Senate and the White House, Canopy Growth's shares will almost certainly soar.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.