Anecdotally, at least, I hear that medical marijuana is sometimes prescribed as a treatment for nausea — but it’s having the opposite effect upon marijuana investors Tuesday morning. Shares of pot stocks such as Tilray Brands (TLRY -9.97%), Canopy Growth (CGC -14.50%), and Aurora Cannabis (ACB 10.74%) have all swung around wildly, from highs as high as up 26% (Aurora) to lows as low as down 18% (Canopy), and everything in between — all in the space of less than an hour of stock market trading.
As things start to settle down circa 10:45 a.m. ET, we’re looking at Tilray stock down 9.5% and Canopy Growth down 12.4%, but Aurora Cannabis up 7.5%.
Such erratic trading patterns may be making cannabis investors feel a bit queasy. But fear not — we’re here to help explain what’s going on.
So what is going on in the marijuana market on Tuesday?
Well, as you can imagine, it’s all a bit confusing. Big picture, matters are still much as they have been over the past couple of weeks:
- President Joe Biden has thrown his support behind legalizing marijuana for medicinal purposes.
- The Department of Health and Human Services (HHS) is recommending downgrading marijuana from a Schedule I drug to just Schedule III (the same level as steroids, testosterone, or codeine, for example).
- The Drug Enforcement Agency may or may not go along with that recommendation.
- Why, even Congress appears ready to make things easier for marijuana investors as it gets set to consider the latest version of the Secure And Fair Enforcement (SAFE) Banking Act, which (if passed) will permit marijuana businesses to finally gain access to banking services.
In short, the regulatory environment for medical marijuana appears to be taking a turn for the better. And yet, at the same time as momentum is building for marijuana legalization, things are getting more complicated in Congress.
As cannabis-focused news site Marijuana Moment reported Tuesday, U.S. Rep Dave Joyce (R-Ohio) — a marijuana legalization proponent — is introducing legislation to prevent federal enforcement of drug offenses in states that have already legalized weed. Simultaneously, another congressman who opposes legalization is raising a ruckus over a letter that President Biden may (or may not) have sent to HHS recommending that the department recommend relaxed regulation of cannabis — and that legislator is questioning the methodology by which HHS concluded that the regulation of cannabis should be relaxed.
Now, it’s hardly surprising that congressmen who oppose cannabis legalization would take steps to derail the process. But after watching Tilray stock gain 10% Monday — and Canopy Growth gain 82% — as investors placed their optimistic bets on marijuana legalization, it’s logical that some investors might be ready to pocket their gains now that things are starting to look more complicated.
What’s much more interesting is that tiny Aurora Cannabis continues to add to its gains Tuesday even in the face of rising uncertainty. After all, Aurora gained 72% on Monday — nearly as much as Canopy Growth — yet as Canopy fell Tuesday morning, Aurora stock kept going up.
Why is that?
Almost certainly, it’s because, unlike Tilray and Canopy, Aurora recently put out actual news of its own to sustain its momentum. Specifically, on Friday, Aurora management reaffirmed its commitment to generating positive free cash flow in 2024, and announced that it is issuing shares to pay down debt, and reduce interest costs to make that goal easier to reach. If Aurora becomes the first of these three well-known cannabis companies to begin generating enough cash to be self-sustaining, that will be a big plus in the stock’s favor, and could arguably make Aurora Cannabis the best bet in marijuana stocks today.
Granted, that’s a big “if.” But it’s the specific “if” that Aurora Cannabis investors are betting on Tuesday.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Tilray Brands. The Motley Fool has a disclosure policy.