What happened

Shares of Aurora Cannabis (ACB -1.92%), Aphria (APHA), Tilray (TLRY), and OrganiGram Holdings (OGI -1.13%) continued the upward momentum in cannabis names today. 

Each was up sharply before gains settled back down. As of 12:45 p.m. EST, Aurora was nearly back to even and OrganiGram up 3%. But Aphria and Tilray -- which have announced plans to merge -- were still up 6% and 10%, respectively. 

So what  

Early gains continued after yesterday's runoff election results secured control of both houses of Congress for the Democratic party. But the subsequent divergence in gains may reflect investor realization that each company should be looked at individually rather than as a group. 

Marijuana flag with green stripes flying at sunset

Image source: Getty Images.

Now what

Canadian pot companies that have aspirations to expand into the U.S. cheered the final election results when the Georgia runoff for the final two Senate seats went to the Democrats. Federal marijuana legalization is required for those companies to be able to do business in the country. 

Aurora Cannabis' business has been struggling more than many of its peers. Since the Canadian pot market opened in October 2018, the company's share price has dropped by 92%. Aurora management has been trying to improve its business fundamentals since it launched a transformation plan early in 2020. The goals are to reduce expenses, better scrutinize capital expenditures, and improve the balance sheet en route to attaining profitability. But in a business update last month, management said its "back to basics" business strategy "will delay the company's ability to achieve positive adjusted EBITDA as management invests in its consumer business."

Aphria seems to be moving in a different direction. The company acquired U.S. craft brewer SweetWater Brewing in November for about $300 million, partly to bring established U.S. distribution infrastructure into its fold. Last month, Aphria and Tilray announced a plan to merge and be led by current Aphria CEO Irwin Simon. The combined company, which will use the Tilray name, would be one of the largest global cannabis companies. Aphria shares are up more than 70% since the start of 2020. 

OrganiGram is also on a better path than Aurora, as it reported net revenue up 25% in the most recently reported quarter versus the prior-year quarter. OrganiGram also has a more flexible operation to help control costs. It operates a single cultivation facility in Moncton, New Brunswick.

The differences in the path of the underlying businesses help explain the direction the stocks are taking as initial enthusiasm for a more cannabis-friendly U.S. government settles down. Investors should continue to follow the underlying business fundamentals even if they want to speculate on the opening of the U.S. market.