A clutch of marijuana stocks have hit their one-year bottoms. Top players Aurora Cannabis (ACB 2.32%), Tilray (TLRY), and Canopy Growth (CGC -1.17%) all reached that dubious milestone at market close on Tuesday after doing so on Monday as well.
Although there was little company-specific news during either day that impacted the trio, broader negative developments recently have added to bearish sentiment.
Perhaps the most significant is the controversy over vaping, in which an increasing number of injuries and even fatalities are being reported in people using this method of consumption. Research conducted across two states indicates that the great bulk of cases in those states involved the use of cannabis in vaping devices intended for tobacco products. Many cannabis companies produce and sell goods for vape users.
Compounding this, analysts that track marijuana stocks are becoming notably less enthusiastic about the leading companies in the sector. Last week, for example, Bank of America cut its recommendation on Canopy Growth -- a bellwether stock in the sector -- from buy to neutral. The bank also eviscerated its price target on the shares, from $46 to $27.
Shortly previous to that, Oppenheimer launched coverage of Canopy Growth stock with a tepid perform (i.e., neutral) recommendation, pointing out that the company is in the midst of booking what the bank estimates will be $500 million in losses over a two-year period.
Another key development seems like a positive for the cannabis industry, but the silver cloud has a dark lining. The Secure and Fair Enforcement (SAFE) Banking Act passed with flying colors in the U.S. House of Representatives. This potentially milestone piece of legislation grants banks and other financial institutions the right to offer basic banking services to companies involved in the marijuana trade.
Although this is desperately needed in a business that is forced to conduct much of its retail activity with cash, with the attendant security risks, it faces an uncertain future.
Powerful Republicans in the Senate, chiefly Mitch McConnell, have indicated resistance to passing laws that help liberalize and legitimize the trade. Many government and cannabis business pundits feel the Senate will not pass either a version of the SAFE Banking Act or similar legislation currently being considered in that chamber.
On Tuesday, Canopy Growth closed down by 4.8% on the day to $21.82 per share. Those figures for Aurora Cannabis were 6.4% and $4.11, respectively, and for Tilray they were 2.3% and $24.18.