Please ensure Javascript is enabled for purposes of website accessibility

Why Tilray, OrganiGram Holdings, and HEXO Stock Jumped Today

By Howard Smith - May 25, 2021 at 3:04PM

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

An analyst upgrade and some positive political momentum are recent tailwinds for cannabis stocks.

What happened

High-growth stocks are back in favor with investors so far this week, and cannabis stocks are gaining today as a result. Canadian growers Tilray (TLRY -3.45%), OrganiGram Holdings (OGI -4.20%), and HEXO (HEXO 1.67%) are all reversing declines seen over the past three months. Though off intraday highs, as of 1:30 p.m. EDT on Tuesday, shares of these companies traded as follows:

  • Tilray up 7.6%
  • OrganiGram Holdings up 3.3%
  • HEXO up 5.7%

So what

In addition to general market sentiment, today's move got a boost from an analyst upgrade in the sector. Fellow Canadian cannabis company Canopy Growth (CDC -0.44%) was upgraded from neutral to buy at equity research firm MKM Partners. The analysts noted overall sentiment in the sector is already low, which might be why other cannabis names also reacted. There is also momentum building in the U.S. surrounding potential federal legalization, which could open a huge new market for Tilray, OrganiGram, and HEXO. 

two people working in area with marijuana plants hanging to dry.

Image source: Getty Images.

Now what

The latest move supporting U.S. legalization came earlier this month when Ohio Rep. Dave Joyce and fellow Republican Don Young, from Alaska, introduced the Common Sense Cannabis Reform for Veterans, Small Businesses and Medical Professionals Act. The congressmen cite actions being taken at the state level and said, "continued cannabis prohibition is neither tenable nor the will of the American electorate." It's notable that Republicans are sponsoring the bill, which gives more momentum to the drive to remove marijuana from the controlled substances list. 

According to Joyce's office, the bill would "create a federal pre-emption to protect financial institutions and other businesses in non-cannabis legal states so that they can service cannabis companies." That would be key for Canadian cannabis companies to be able to do business in the U.S. Canadian companies like Tilray are already active outside Canada, and have even begun to prepare for entry into the U.S. Tilray has grown its medical cannabis business in Europe, and after its recent combination with Aphria, has access to distribution infrastructure in the U.S. through the SweetWater Brewing business. 

Also outside Canada, OrganiGram entered into a multiyear agreement to supply dried flower to one of Israel's largest and most established medical cannabis producers last year. Earlier this month, HEXO announced its first U.S. production facility through a subsidiary in Northern Colorado. The company said in a statement, "The Colorado facility will be instrumental to successfully executing on our U.S. strategy." 

The cannabis sector is volatile and in many respects speculative. There's no guarantee marijuana will be legalized or decriminalized federally in the U.S., or that new states will join those that have already passed such legislation. Investors should expect sharp movements to continue in the sector, and realize that any investment thesis may take many years to play out. Along the way, there will be days like today with sharp movements in the stocks. 

Howard Smith owns shares of Tilray, Inc. The Motley Fool owns shares of and recommends OrganiGram Holdings. The Motley Fool recommends HEXO Corp. The Motley Fool has a disclosure policy.

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

Tilray Stock Quote
$4.05 (-3.45%) $0.14
OrganiGram Holdings Stock Quote
OrganiGram Holdings
$1.14 (-4.20%) $0.05
HEXO Stock Quote
$0.26 (1.67%) $0.00
Victory Portfolios II - VictoryShares US EQ Income Enhanced Volatility Wtd ETF Stock Quote
Victory Portfolios II - VictoryShares US EQ Income Enhanced Volatility Wtd ETF
$69.61 (-0.44%) $0.31

*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
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/17/2022.

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.