Cannabis stocks were rallying before the weekend, with a number of key stocks carrying the positive momentum over into the start of the week. For observers used to an event-driven industry, the largely value-induced rally may have come as something of a surprise.
Other pundits were quick to point out the influence of entertainer Drake, whose partnership with Canopy Growth saw the stock jump 9%.
Pot stocks have seen some intense price volatility in the past two weeks, as traders make the most of oscillating prices in the ramp up for the holiday period. In fact, winter sales could be a significant watershed moment for cannabis stocks now that the full gamut of marijuana asset types is finally available legally.
Cannabis investors need 2020 vision
HEXO (TSX:HEXO)(NYSE:HEXO) is moving into a price-competitive position to target the black market ahead of the holidays. Next year will be make-or-break for legal pot, with four main factors determining how successful Canadian cannabis companies are this holiday season, namely: Health Canada constraints, the number of retail outlets selling cannabis products, supplies, and the market itself.
All four factors could put a crimp in cannabis companies’ projected sales. With packaging likely to be plain and not enough actual stores to buy from, the retail scene could be decidedly frosty over the next couple months.
Over-supply and a crowded playing field also mean that companies could find it hard to command high prices and a big enough market share, while demand on the customer side could also flag.
A breakthrough in time for the festive season?
Another key development that could shake out in favour of cannabis producers leaning into the vaping industry is the news that vitamin E acetate seems to be a common molecule present in all cases of vape-related lung injuries investigated by the Centers for Disease Control and Prevention (CDC).
Why is this good news? Well, if a harmful element can be removed from vape products, then the industry may not be dead in the water after all.
However, the CDC has cautioned that the finding is tentative and that other substances have not yet been ruled out as causative factors in the rash of vaping-induced illnesses.
While it’s too early to take this as a buy signal for companies invested in the vaping craze, investors should take a wait-and-see stance. For now, the CDC’s warning to avoid THC vapes remains in place.
In the meantime, other cannabis 2.0 asset types recently released into the wild, notably cannabis-laced drinks, could make a big splash over the holiday period.
HEXO and Molson Coors partnered up to form Truss, a marijuana beverage brand that is slated to begin pumping its cannabis-laden liquids into the market at some point in December. The Canadian market is valued at more than $500 million a year.
The bottom line
The holiday period is looking like a strategic watershed for sales, with all of the ducks finally lined up for Canadian companies. Investors will be taking note in the new year, with holiday sales likely to determine which pot producers gain dominance over the market.
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Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. The Motley Fool owns shares of Molson Coors Brewing. The Motley Fool recommends HEXO. and HEXO.