What happened

Marijuana stocks are lighting up in Wednesday afternoon trading, with shares of Aurora Cannabis (ACB 3.26%) and Aphria (APHA) both gaining 4.8% through 1 p.m. EDT, and Hexo (HEXO) surging more than twice as much, up 11%.

You can thank Bank of America for that.

Marijuana plants

Image source: Getty Images.

So what

Early this morning, Bank of America resumed coverage on a trio of the best-known marijuana stocks: Aurora Cannabis (which is up today), Tilray (TLRY) (which is merging with Aphria, sending that stock up), and Canopy Growth (CGC 0.77%).

Curiously, BofA was most positive about Canopy's chances, resuming coverage of the stock with a buy rating and a prediction that the stock will hit $36 a share within a year -- a 28.5% gain from its current stock price of about $28. As StreetInsider.com reported today, BofA thinks that Canopy's "balance sheet, mgmt team and partnerships position CGC well to enter the US if there is federal legalization ... [and that] CGC's improving EBITDA and cash flow make its shares attractive in the meantime."

But BofA feels broadly positive about the rest of the marijuana industry as well, sparking a stock price rally across the sector. As TheFly.com just reported, BofA believes the United States is on track toward legalizing marijuana use at the federal level (a thesis I agree with, by the way), although the timeline for such legalization still remains uncertain.

Now what

Given the uncertainty about timing, however, investors might want to give special consideration to some of the reservations Bank of America expressed, despite its broad optimism about the marijuana industry.

In particular, the analyst highlights Tilray's low cash balance (the company actually carries more debt than it has cash available to pay it with) as a concern, as well as its "lack of a major CPG investment partner," notes TheFly. Aurora Cannabis is in a similar position, debt-wise, which probably explains why, out of the three stocks on which Bank of America resumed coverage today, Aurora was the only one tagged with a rating lower than buy.

Even if Aurora, Aphria, and Hexo are the stocks gaining the most from Bank of America's comments today, Canopy Growth is still the marijuana stock Bank of America likes best.