What happened
Canadian-licensed marijuana producer Aurora Cannabis (ACB 5.88%) had a month for the record books in November. The pot company's stock rose by a whopping 188% over the course of the month, according to data from S&P Global Market Intelligence.
The spark? Aurora's shares took flight for two reasons:
- Joe Biden's win in the 2020 presidential election could set the stage for major cannabis reform in the United States.
- A landmark piece of legislation known as the Marijuana Opportunity Reinvestment and Expungement Act (MORE Act) was making its way through the U.S. House of Representatives last month. Last Friday, the House passed this historic bill that could effectively end the federal prohibition on cannabis.
Image source: Getty Images.
So what
Prior to last month's monstrous rally, Aurora's shares were down by an eye-catching 62% over the past 22 months. The pot magnate's shares were in free fall over this period due to massive oversupply in its home market of Canada, sluggish international sales, hefty goodwill impairment charges, and most importantly, the issuance of new shares at a dizzying pace in order to raise capital.
Investors, for their part, appear to think that these hurricane-force headwinds may have weakened to a significant degree following the U.S. presidential election. Underscoring this point, Aurora's market cap swelled by a noteworthy $1.4 billion within a mere three weeks of Biden's win last month.
Now what
Can Aurora's shares continue to shoot higher? In the short term, investor enthusiasm for this popular pot stock might remain at fever pitch. But that doesn't mean that savvy investors should add this cannabis stock to their portfolio right now.
The reality of the situation is that the MORE Act may never see the light of day in the Senate -- and even if it does, the U.S. cannabis market is already chock-full of competition from various multistate operators. In short, despite its recent hot streak, Aurora's stock simply isn't a compelling growth play.
