Pot stocks are taking it on the chin yet again today. As of 2:01 p.m. ET Thursday afternoon, shares of Aurora Cannabis (ACB 0.95%) were down by 6.8%, Canopy Growth's (CGC -2.43%) equity was underwater by 6.8%, OrganiGram Holdings' (OGI 4.35%) share price was lower by 4.25%, and Tilray Brands (TLRY) had shed another 6.32% of its value.
Over the past five trading sessions, Aurora Cannabis, Canopy Growth, OrganiGram Holdings, and Tilray Brands have dipped by more than 10%. For the year, these four pot stocks are all down by well over 40%.
Two issues seem to be weighing on these four Canadian pot stocks of late:
- Last Monday, the White House said it "has nothing more to add" in regards to the topic of marijuana legalization during a press briefing. The subject came up when a reporter asked White House Press Secretary Karine Jean-Pierre if President Biden was prepared to fulfill his campaign promise on cannabis decriminalization. To date, the administration has largely sidestepped this hot button issue in order to make headway on more pressing agenda items such as climate change, college loan forgiveness, and inflation. The Biden administration, in short, doesn't seem willing to push marijuana legalization to the top of its priority list.
- Last Friday, Federal Reserve Chairman Jerome Powell said that more interest rate hikes are coming down the pike in order to tamp down inflation. Stocks, as a result, have largely edged lower over the past week in response to this news. Pot stocks have been particularly hard hit by this announcement because investors appear unwilling to own these cash-flow-negative companies ahead of a possible economic downturn. Aurora Cannabis, Canopy Growth, OrganiGram, and Tilray Brands all posted net losses in their most recent fiscal quarters.
Should investors start to bottom fish on this beaten-down space? That's a hard call to make. Aurora Cannabis, Canopy Growth, and Tilray Brands all ought to benefit from the eventual legalization of adult-use marijuana for recreational purposes in Germany. What's more, OrganiGram has proven itself to be a shrewd operator. The company's craft cannabis brands, in fact, have been rapidly gaining market share in recent quarters.
All that being said, this bear market only seems to care about profitability -- a feature that has largely eluded these four companies so far. Put simply, the market may continue to punish these four pot stocks until their businesses begin to turn a profit on a consistent basis. That doesn't necessarily mean that investors shouldn't start to nibble on these names, but stakeholders should definitely be willing to hold for the long term.