What happened
Canadian marijuana stocks have been on fire this week. Speaking to this point, Aurora Cannabis (ACB +3.35%) saw its shares soar by 88% through the first three and a half days of trading this week, while Cronos Group (CRON +3.08%) and SNDL (SNDL 1.31%) managed a 17.5% and 19.2% gain, respectively, over this same period, according to data provided by S&P Global Market Intelligence.
These impressive increases contrast with the modest 1.22% rise of the S&P 500 index over the same period. Furthermore, Aurora Cannabis, Cronos Group, and SNDL had all suffered significant losses in the past 12 months before this week's sudden reversal.
So what
These high-profile Canadian cannabis stocks rallied this week in response to three separate catalysts that acted in concert to dramatically improve investor sentiment. These factors were:
- Aurora Cannabis reiterated last Friday that it expects to achieve positive cash flow by calender year 2024, beating analysts' expectations by two years. Mr. Market, for its part, seemed to take this news as a sign that the Canadian cannabis market is starting to work through its early growing pains.
- Senator Chuck Schumer, the majority leader of the U.S. Senate, reiterated his commitment to advancing the SAFE Banking Act this week, which would allow banks and other financial institutions to serve cannabis businesses without fear of federal prosecution. The bill reportedly has bipartisan support and could move out of committee in the coming weeks. This would be a major step forward for the U.S. cannabis industry, which currently operates largely on a cash basis.
- In late August, the U.S. Department of Health and Human Services recommended that marijuana be reclassified from Schedule I to Schedule III under the Controlled Substances Act. This recommendation, if adopted by the Drug Enforcement Agency, would facilitate research on the therapeutic effects of cannabis and possibly pave the way for its eventual legalization at the federal level.
Now what
Are any of these pot stocks still a buy after this week's rally? Aurora Cannabis and SNDL screen as intriguing speculative buys for risk-tolerant investors with a long-term outlook. Aurora Cannabis is currently exiting a three-year-long reorganization plan to rightsize its output, reduce costs, and position it as a leader in medical cannabis in both Canada and key international markets like Germany.
NASDAQ: ACB
Key Data Points
SNDL has remade itself following a pair of major acquisitions over the past two years, and it sports one of the industry's strongest balance sheets. The Canadian pot titan, in turn, ought to have the staying power necessary to benefit from the slow march toward widespread legalization in high-value markets like the United States.
NASDAQ: SNDL
Key Data Points
Cronos Group, on the other hand, appears to be more of a business development play at this point. The company's shares could deliver strong returns for patient investors, but its organic growth profile isn't nearly as strong as many of its peers like Aurora Cannabis and SNDL.
