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Cannabis Sector Is Watching Just One Metric: U.S. Legalization

By Investing.com (Brenda O'Farrell/Investing.com)Stock MarketsMar 09, 2021 07:37AM ET
www.investing.com/analysis/cannabis-sector-is-watching-just-one-metric-us-legalisation-200565927
Cannabis Sector Is Watching Just One Metric: U.S. Legalization
By Investing.com (Brenda O'Farrell/Investing.com)   |  Mar 09, 2021 07:37AM ET
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Many observers of the cannabis sector thought that 2021 was off to a roaring start, with the shares of a number of leading companies posting double-digit gains on the prospect of national legalization of the marijuana in the United States. But irrespective of investor hopes for the recreational and medicinal plant under the Biden administration, the up-and-down volatility that characterized the sector returned in early March.

Many cannabis stocks performed well until the end of February.

Companies like Tilray (NASDAQ:TLRY), Canopy (NASDAQ:CGC) (TSX:WEED), Aurora Cannabis (NYSE:ACB) (TSX:ACB) and Cronos Group (NASDAQ:CRON) (TSX:CRON) all posted impressive upticks in February. But as the calendar turned the page into March, gains slipped. By the end of the first full week of trading in March, the short-term swings were showing signs of returning.

Tilray, which saw its stock gain about 35% in February, saw some of those gains erased in the early days of March.

TLRY Daily
TLRY Daily

In fact, by the close last Friday, Tilray stock had lost just over 11% on the week.

The stock performed well late last month after posting better-than-expected results, the first earnings after announced its pending merger with Aphria (NASDAQ:APHA).

Then there was Canopy Growth. Shares of the cannabis giant yesterday closed at US$30.86, down about 1% on the day, adding to the about 5% loss for the stock in the first week of March, proving that it is not immune to trends. But it will take a lot more than the whisper of a retreat to shake this steady performer.

In the last year, its shares have jumped more than 100%. 

CGC Daily
CGC Daily

Shares of Aurora Cannabis last week shaved 9% from their value. They closed yesterday at $9.61, after hitting a brief high of $18.97 in February.

Meanwhile shares of Cronos Group were trimmed by about 9% last week as well.  They closed yesterday at $9.44, a steady decline after hitting an early February high of $15.55.

The one thing to notice when looking at all these charts is the early February spike, which corresponds with news of the state of Virginia approving legislation to legalize marijuana.

All of this points to one thing: Currently, there is only one thing that cannabis sector investors are laser focused on, outweighing any one company’s merger talks, deal announcements or earnings results—and that is federal legalization in the US.

That is the only thing investors are waiting for right now.

Mexico Set To Legalize

Former Mexican president Vicente Fox late last week said the Central American country is expected to legalize cannabis.

In an interview with Reuters, Fox, who is a director of Colombian-Canadian Khiron Life Sciences (OTC:KHRNF), which focuses on the medical cannabis sector, said the Mexican legislature will vote to legalize the drug later this week.

The legislation, backed by President Andes Manuel Lopez Orbrador, represents a major shift for Mexico, which has longed been plagued by warring drug cartels.

The move would create one of the biggest markets for cannabis, which many companies in the sector, including Khiron Life Sciences, are looking to tap into.

Shares of Khiron Life Sciences jumped more than 29% yesterday, to close at 42.5 cents, returning to levels that it hit in February. Still a relatively small company, with a market cap of US$64.26 million, the company’s shares have struggled, losing about 34% in the last year.

Cannabis Sector Is Watching Just One Metric: U.S. Legalization
 

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Cannabis Sector Is Watching Just One Metric: U.S. Legalization

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Comments (2)
Casador Del Oso
Casador Del Oso Mar 09, 2021 9:59AM ET
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Is it really legalization or is it really decriminalization with high taxes and restricted commerce? The black market will never eliminated unless the cost of product is low to the consumer.
Gene Kret
Gene Kret Mar 09, 2021 7:45AM ET
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POWW is a buy.
 
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