Factors Fueling the Growth of Marijuana Stocks

Various themes and sectors generated interest and attention as the first quarter drew to a close. However, a sector that has been in a lull for a significant period has reignited the imagination and hope of long-time investors after finishing the first quarter in style.

Over the course of the previous month, several cannabis stocks saw a dramatic surge, setting the industry alight as gains reached double to even triple digits in some cases. Cannabis companies like Canopy Growth NASDAQ: CGCTilray NASDAQ: TLRYand Aurora Cannabis NASDAQ:ACB have seen notable increases in volume and price, leaving investors at a potential crossroads. Is it time to exercise some caution and avoid risk after the rapid and extreme upward move, or is it better to dive straight into the green gold rush?

Let’s take a closer look at each of the stocks mentioned above and understand what has driven their recent gains.

The catalyst behind the escape

So what catalyst lies behind the extreme sector movement that appears to have awakened several cannabis stocks from their long period of calm? Well, there were two separate catalysts, both bringing significant momentum.

First, Vice President Kamala Harris reportedly supported marijuana legalization during a closed-door meeting at the White House in mid-March. She has also asked the U.S. Drug Enforcement Administration (DEA) to reclassify marijuana, citing its current classification as a Schedule I drug as “absurd.” Since she joined Biden’s ticket, the comments marked the first time Harris has signaled support for federal legalization, potentially influencing the administration’s stance ahead of the presidential election.

Then, and arguably the most significant catalyst, was when Germany passed a law to fully legalize marijuana, effective April 1, allowing its possession, home cultivation and distribution among social clubs. This news could benefit investors in cannabis stocks like Tilray, Cronos and Canopy Growth, particularly as Germany moves forward with laws to standardize commercial production and retail sales of cannabis.

3 cannabis stocks that are moving

Tilray, a pharmaceutical and cannabis company founded in 2013, is headquartered in Canada and operates globally in regions such as the United States, Europe, Canada, Australia and Latin America. They specialize in the production and distribution of medical and recreational cannabis products.

TLRY has seen an impressive turnaround in the previous month, with the stock up nearly 43%. Interestingly, insiders have been buying shares for the first time in recent years, purchasing $183,210.00 worth of shares in the first quarter of the year. Based on three analyst ratings, Tilray has a Hold rating. Analysts’ consensus price target of $2.83 projects a potential upside of nearly 15% for the cannabis company.

Canopy Growth specializes in the cultivation and distribution of a wide range of cannabis products, aimed at both medical and recreational users. From dried cannabis to oils, soft gel capsules and edibles, Canopy Growth offers several options to meet customer needs.

Canopy’s recent stock performance has been remarkable, with the stock soaring 162% in the past month. Its volume has also risen to incredible levels, with shares trading close to 200 million shares over the previous four trading sessions. However, analysts are bearish on the stock, with a downgraded rating and a consensus price target of near 44% downside.

Aurora and its subsidiaries produce, distribute and sell cannabis and cannabis-derived products globally. They operate in three segments: Canadian cannabis, European cannabis and plant propagation.

Like the two names mentioned above, Aurora’s shares have attracted considerable attention over the previous month. The stock is up nearly 40% over the past month, with volume rising sharply. Sentiment appears predominantly bearish on the name, with significant short interest of 24.5%, representing 3.8 million shares, as of March 15.

Before you consider Canopy Growth, you’ll want to hear this.

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While Canopy Growth currently has a “Reduce” rating among analysts, top analysts believe these five stocks are better buys.

View the five stocks here