Please ensure Javascript is enabled for purposes of website accessibility

Why Marijuana Stocks Like Canopy Growth and Aphria Got Trashed on Thursday

By Eric Volkman - Mar 4, 2021 at 5:01PM

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

It wasn't their fault, honest.

What happened

Thursday was a day to forget for most stock market investors, particularly holders of marijuana titles. Industry bellwethers Canopy Growth (CGC 4.72%), Aurora Cannabis (ACB 7.75%), Aphria (APHA), HEXO (HEXO 5.87%), and Organigram Holdings (OGI 7.52%) all fell harder than the S&P 500 index at declines ranging from 6.1% (Aurora) to just over 8% (Aphria).

So what

The outlook for the marijuana industry has brightened significantly of late thanks largely to both a new presidential administration and a Senate leadership that are more amenable to federal marijuana reform.

A man's hand clutching a marijuana plant.

Image source: Getty Images.

However, this has obscured the fact that cannabis companies remain speculative investments. Weed has only been legalized/decriminalized on a piecemeal, state-by-state basis, and weed companies face many other challenges, including lack of access to basic financial services, price-dampening black market competition, etc. Even the most successful operators struggle to turn a profit and limit cash burn.

So, because they are speculative stocks, they tend to be on the firing line during market downturns. At such times, investors typically embrace better established, and/or more reliable cash and profit generators, and are more tempted to sell their perceived "long-shot" holdings. 

Now what

This shouldn't dissuade investors of marijuana stocks which, despite those challenges, have a promising future. Among other positive developments, Aphria's coming merger with Tilray will make a powerful company, and HEXO is bulking up with the looming acquisition of Zenabis Global. Thursday's declines could very well present good "buy-on-weakness" openings for cannabis bulls.

 

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
$1.53 (7.75%) $0.11
Canopy Growth Stock Quote
Canopy Growth
CGC
$3.77 (4.72%) $0.17
OrganiGram Holdings Stock Quote
OrganiGram Holdings
OGI
$1.06 (7.52%) $0.07
HEXO Stock Quote
HEXO
HEXO
$0.24 (5.87%) $0.01

*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 analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/27/2022.

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.