What happened

After initially selling off hard in early trading Wednesday, cannabis stocks made a comeback later in the day. By the closing bell, shares of Green Thumb Industries (GTBIF -0.25%) -- which had been down as much as 6.1% -- closed up 0.4%. Curaleaf Holdings (CURLF 2.17%) -- down as much as 5.1% in the morning -- cut its losses to 2.3%. Canopy Growth (CGC 3.69%) flipped from a 2.7% morning loss to close the day up 8.9%.

And in fact, Canopy Growth may be the reason other cannabis stocks are looking healthier today.

So what

On Tuesday, in a press release announcing its plan to "fast track entry into the U.S. cannabis market," Canopy Growth said it is creating a U.S. holding company to "unleash the value of its full U.S. cannabis ecosystem" as soon as marijuana is legalized here.

Canopy cited the rapid spread of legalization of cannabis at the state level as reinforcing its belief that federal legalization is imminent, and explaining why it is now preparing to make a "fast start" on expanding its U.S. business as soon as that happens.

The U.S. marijuana market will be worth more than $50 billion in annual sales by 2026, estimates Canopy, and the company aims to capture as much of this market as it is able to. Moreover, by placing its majority ownership of marijuana producer Acreage Holdings, as well as its 100% ownership of edibles specialist Wana and cannabis extracts company Jetty under one holding company, Canopy USA LLC, management aims to streamline its business, cut costs, and maximize revenue, advancing the company toward profitability.

Now what

Now this all sounds like good news for Canopy Growth -- indeed, responding to the announcement, investment bank Canaccord Genuity upgraded shares of Canopy to hold this morning, as The Fly just reported, and raised its price target to about $3.14 per share, within pennies of where the stock closed today.  

But while creation of Canopy USA may provide "a significant benefit to the company," according to Canaccord, it's less obvious why Canopy's corporate reorganization would be helping out the stocks of Green Thumb and Curaleaf. So why is that happening? Well, basically, it seems that investors in Green Thumb and Curaleaf are taking Canopy's move -- and particularly the urgency of it, the "fast track entry" bit -- as evidence that full-scale federal legalization may be just around the corner.

It's understandable why Canopy might think that, and why investors in other marijuana stocks might hope Canopy is right -- after all, it was only earlier this month that President Joe Biden announced plans to pardon certain federal marijuana convictions, and potentially reschedule marijuana as no longer a Schedule 1 prohibited drug. That doesn't necessarily imply the full-scale "U.S. federal permissibility" that Canopy is banking on, however. For that matter, even in Canada, where marijuana is basically "permissible," marijuana companies continue to struggle to earn a profit selling it.

Given this -- and the even more sobering fact according to data from S&P Global Market Intelligence, no one on Wall Street sees Canopy Growth earning any profits for the next five years -- I suspect investors' rapid about-face on Canopy Growth stock has more to do with irrational exuberance than it does with a dispassionate crunching of the numbers and analyzing Canopy's chances. Investors who are interested in profiting from marijuana should probably focus their attention on Curaleaf, which is already at least pro forma profitable today, or Green Thumb, which has actual profits under generally accepted accounting principles (GAAP), instead.

The fact that neither of those stocks jumped nearly as high as Canopy did this morning makes that even better advice.