We can attribute Canopy Growth stock's powerful performance last month to several factors, among them the release of fiscal second-quarter 2021 results that beat analysts' expectations.
The biggest catalyst, however, was the result of the U.S. presidential election, which boosted stocks across the cannabis space. The market expects that a Democratic administration under President-elect Joe Biden will be more favorable than the current administration to the cannabis industry. Indeed, Biden is in favor of decriminalizing marijuana. Taking that step could eventually open the door to legalizing cannabis on a federal level, though that's not a policy he currently supports.
Biden's win wasn't the only favorable election-related event for the cannabis industry. Marijuana legalization ballot measures passed in five states: New Jersey, Arizona, and Montana will now allow it for recreational use, and Mississippi and South Dakota approved it for medical use. With those additions, marijuana is now legal for either medical use or both medical and recreational purposes in a total of 36 states and Washington, D.C.
This state news doesn't directly benefit Canopy, since it can't enter the U.S. marijuana market until the substance is legal on a federal level. However, it does reflect the growing strength of the legalization movement.
For its fiscal 2021 second quarter, which ended on Sept. 30, Canopy's net revenue was a record-setting 135.3 million Canadian dollars. That topped the analysts' consensus estimate of CA$117.2 million and was 23% higher than Q1's revenue. It also represented growth of 24% year over year after adjusting for a portfolio restructuring charge incurred in the year-ago quarter for returns, return provisions, and pricing allowances.
The company turned in a net loss of CA$0.09 per share. While that was a much worse result than the gain it posted in the year-ago period, it was an improvement from last quarter and better than the net loss of CA$0.36 per share that analysts had expected.
"I'm confident that we're now firmly on a path to achieve positive adjusted EBITDA [earnings before interest, taxes, depreciation, and amortization] at some point next fiscal year," CEO David Klein said on the fiscal Q2 earnings call.
Canopy Growth and other cannabis stocks could make additional big moves following the Jan. 5 runoff elections in Georgia for that state's two U.S. Senate seats. The results of those contests will determine who controls the Senate, which could have major implications for the marijuana industry. Republicans need to win just one of the seats to maintain a majority in the chamber. If Democrats win both, it will be split 50-50. But since the vice president casts tie-breaking votes in the chamber, that scenario would give Democrats the upper hand in the Senate beginning on Jan. 20.