Please ensure Javascript is enabled for purposes of website accessibility

Why Aphria, Canopy Growth, and Aurora Cannabis Stocks Jumped Today

By Howard Smith - Mar 1, 2021 at 2:12PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Cannabis company stocks are getting a boost after another U.S. state passed legalization legislation.

What happened

Shares of cannabis growers jumped Monday after another U.S. state voted for legalization over the weekend. As of 11:45 a.m. EST, shares of several traded higher:

Aphria (APHA), up 6.7%;

Canopy Growth (CGC 5.67%), up 6.6%; and 

Aurora Cannabis (ACB 4.28%), up 7.6%.

So what

Any news of progress on marijuana legalization typically drives shares of pot companies higher. On Saturday, Virginia became the 16th U.S. state, plus the District of Columbia, to approve marijuana legalization for adult recreational use. Gov. Ralph Northam still needs to sign the bill, but he supports legalization, which will allow for sales to begin in 2024.

Flag with green marijuana leaf and green stripes

Image source: Getty Images.

Now what

Canadian marijuana businesses aren't going to be directly affected by state legalization in the U.S. But the stocks are rising because investors see a path toward federal legalization as more states vote for it. Canadian pot growers need federal legalization to be able to enter the U.S. market, but Aphria and Canopy Growth have been actively preparing for the possibility. 

Aphria acted on its strategy to make inroads in the U.S. last fall when it acquired U.S. craft brewer SweetWater Brewing Company for about $300 million. SweetWater is currently available in 27 states plus Washington, D.C., and Aphria said the plan was to have "a platform and infrastructure within the U.S. to enable it to access the U.S. market more quickly in the event of federal legalization."

Canopy Growth has a path into the U.S. market through beverage company Constellation Brands. Constellation added to its initial $4 billion investment in Canopy Growth with another almost $200 million invested through warrants last year. 

Aurora Cannabis doesn't yet have any distribution framework set up for potential U.S. sales. But investors have been looking for something to help turn the troubled grower around. Shares are down almost 90% in the last three years, and the company has acknowledged it is working on a business transformation. 

Marijuana stocks have attracted speculative interest from investors since Canada legalized recreational use more than two years ago. The potential of the U.S. market drives even more interest, even for the Canadian companies. Investors should realize that federal legalization will be required for the companies to perform business transactions across the border. But news of another state legislature voting to legalize pot use gives investors more hope that the companies will eventually have a huge new market in which to compete. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Aphria Stock Quote
Aphria
APHA
Aurora Cannabis Stock Quote
Aurora Cannabis
ACB
$2.68 (4.28%) $0.11
Canopy Growth Stock Quote
Canopy Growth
CGC
$5.03 (5.67%) $0.27

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
322%
 
S&P 500 Returns
116%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.