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Why Marijuana Stocks Like Aurora Cannabis and HEXO Are Sinking Today

By Eric Volkman - Feb 17, 2021 at 3:41PM

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Investors, it seems, are sobering up about the weed industry after pushing its stocks high over the past few days.

What happened

Wednesday is not shaping up to be a memorable day for marijuana stock investors, with many of the sector's top names dropping in price. As of late afternoon, Aurora Cannabis (ACB -3.62%) was down by 8%, HEXO (HEXO -5.11%) had fallen nearly 7%, and cannabidiol (CBD) products specialist Charlotte's Web Holdings (CWBHF -5.24%) was trading 6% lower.

So what

It was actually a fairly quiet news day for Aurora, HEXO, and Charlotte's Web in particular and for marijuana stocks generally. That followed a burst of happenings in a short space of time; HEXO's announcement that it is acquiring peer Zenabis, Canopy Growth's third-quarter earnings, etc.

Marijuana leaves plus joints and flower.

Image source: Getty Images.

For the most part, these developments were taken positively by investors, and the stocks began to trade higher. On top of that, members of the suddenly high-profile Reddit WallStreetBets group briefly latched on to marijuana stocks as value plays and/or potential short squeeze candidates.

But this rally appears to have been short-lived, with investors taking profits and perhaps returning to the sober realization that marijuana companies still have many challenges in front of them.

Now what

Yes, the decriminalization/legalization trend seems to be gathering steam, but profitability throughout the industry is still scarce, affected by negative factors including oversupply, black market competition, and the challenges of selling products that remain illegal at the federal level in the U.S.

Cannabis stock prices seem to be coming down to more reasonable levels, perhaps on the back of these considerations.


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Stocks Mentioned

Aurora Cannabis Stock Quote
Aurora Cannabis
$2.93 (-3.62%) $0.11
GameStop Corp. Stock Quote
GameStop Corp.
$95.66 (-3.56%) $-3.53
Canopy Growth Stock Quote
Canopy Growth
$5.52 (-5.96%) $0.35
HEXO Stock Quote
$0.28 (-5.11%) $0.02
Charlotte's Web Holdings, Inc. Stock Quote
Charlotte's Web Holdings, Inc.
$0.41 (-5.24%) $0.02
Zenabis Global Inc. Stock Quote
Zenabis Global Inc.

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

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