What happened

What a difference a day makes. Yesterday, the cannabis space was glowing green thanks to two potential catalysts coming down the pike. Specifically, Germany is reportedly moving to legalize adult-use marijuana by 2024 following a sea change in its political leadership. Second, there were rumblings out of Washington, D.C., that a long-awaited Senate bill to legalize marijuana was close to a vote. 

As this German push to legalize cannabis for adult use is still two years away, and the aforementioned Senate bill doesn't appear to have the votes needed to pass, speculators are apparently rethinking their positions. Underscoring this point, shares of some of Canada's top marijuana companies are all deep in the red today.

As of 12:23 p.m. ET Friday afternoon, Aurora Cannabis' (ACB -2.74%) stock was down by a hefty 7.8%, shares of Canopy Growth (CGC -2.68%) were underwater by 8.8%, Tilray Brands' (TLRY -1.94%) share price was lower by 11%, and Sundial Growers (SNDL 2.21%) had fallen nearly 3%.   

A flowering cannabis plant.

Image source: Getty Images.

So what

The stocks of Aurora, Canopy Growth, Tilray, and Sundial Growers have all been under immense pressure this year. The industry's deteriorating fundamentals and anemic growth prospects have caused a large number of shareholders to move onto greener pastures -- especially with the U.S. stock markets in full retreat over recessionary fears. 

Stated simply, cannabis stocks desperately need a needle-moving catalyst to entice investors back. Germany legalizing weed for adults would certainly go a long way toward meeting that goal. The country, after all, is one of the most valuable in terms of potential annual sales for cannabis companies. Tilray, in particular, already has a sizable footprint there.

The problem is that the legislative process to legalize weed in Germany won't happen overnight. While the country does seem to be on the path toward legalization, several important pieces have to fall in place first. As such, it's not shocking to see speculators rethinking their positions today.

On the U.S. front, there is little hope in political circles that this Senate bill -- or similar bills in the U.S. House of Representatives -- will become law anytime soon. There is substantial opposition to these bills from Republican lawmakers, and President Biden has never shown much support for full legalization. Therefore, this potential catalyst arguably doesn't have much weight behind it.   

Now what

Are any of these top Canadian cannabis stocks a strong buy right now? All things considered, I think Tilray Brands is probably the best of the bunch. Aurora and Canopy Growth are both staring down some problematic issues with their core fundamentals right now. And Sundial Growers has to address its sub-$1 share price in order to remain listed on the Nasdaq stock exchange. Tilray Brands, on the other hand, has a potential competitive advantage in the intriguing European market. That said, this cannabis stock is still a long-term proposition.