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Why Marijuana Stocks Tilray, HEXO, and Charlotte's Web Were on Fire Monday

By Eric Volkman - Jan 4, 2021 at 5:59PM

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A positive analyst note was the apparent spark that lit a broad sector rally.

What happened

Buoyed by an optimistic research note from a prominent analyst, a clutch of notable marijuana stocks saw their share prices rise nicely on the first trading day of 2021.

Tilray ( TLRY ) and HEXO ( HEXO -8.00% ) were among those winners, with gains of nearly 9%. Meanwhile, cannabidiol (CBD) specialist Charlotte's Web Holdings ( CWBHF -3.88% ) enjoyed an 11% pop. 

Marijuana flower on fire.

Image source: Getty Images.

So what

The rally seems to have been triggered by analyst Andrew Partheniou of Stifel.

Like many weed industry observers, Partheniou has become more bullish due to what is becoming a more favorable regulatory environment in the U.S. -- a particularly tempting market for Canadian companies like Tilray and HEXO. Such businesses are prohibited from exporting to the U.S. at the moment, since marijuana is still illegal at the federal level.

While Charlotte's Web sells CBD products (and is based in the U.S. already), it is lumped into the marijuana stock category, and its performance often tracks its peers.

Now what

Partheniou wrote in a new analysis that marijuana companies "are now reporting positive net income, with some achieving free cash flow and a slew of catalysts in 2021 to accelerate positive momentum. However, the robust performance has yet to be fully captured in share prices."

While Tilray, HEXO, Charlotte's Web, and their ilk continue to face daunting challenges, Partheniou is right: They stand to benefit from recent (and, hopefully, upcoming) improvements in the landscape. True believers in marijuana stocks should keep the faith.

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.

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Stocks Mentioned

Tilray Stock Quote
Tilray
TLRY
HEXO Stock Quote
HEXO
HEXO
$0.92 (-8.00%) $0.08
Charlotte's Web Holdings, Inc. Stock Quote
Charlotte's Web Holdings, Inc.
CWBHF
$1.24 (-3.88%) $0.05

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

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