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Correction Sees Cannabis Stocks Fall

Published 03/19/2019, 04:08 AM
Updated 02/13/2024, 12:40 PM

Shares in most major Canadian cannabis producers are now undergoing a correction following moderate-to-strong growth in response to Hexo Corp (TO:HEXO) posting better Q2 earnings (up to $16.2 million).

As the company itself acknowledges, it owes a large part of this success to the significant rise in demand within the recreational cannabis sector as a whole. Just a day earlier, it was another positive development for Hexo that helped to buoy the market as the company announced plans to acquire Newstrike Brands Ltd. — a venture backed by former Canadian rock group The Tragically Hip — in a deal worth an estimated CAD 263 million (USD 198 million). Once it completes the acquisition, Hexo will gain close to 2 million square feet of additional production space.

Finally, the market received one last piece of good news this week in the form of Aurora Cannabis's (ACB) announcement that major investor Nelson Peltz had joined the company as a senior advisor.

In conclusion, it is likely that this downward correction will be sustained over the medium-to-short term, as is to be expected after such a sharp rise. With this in mind, we can expect shares in the big Canadian producers to continue on their current trajectory, with Aurora Cannabis Inc (TO:ACB) tipped to fall to $8, Canopy Growth Corp (NYSE:CGC) to $45, Tilray Inc (NASDAQ:TLRY) to $72, Aphria Inc (TO:APHA) to $12 and Cronos Group Inc (NASDAQ:CRON) to $20.

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