Cannabis Stocks: A Volatile Week Sees Share Prices Soaring

Cannabis stocks like Canopy Growth (TSX:WEED)(NYSE:CGC) have rocketed during a volatile week in politics. Which ones are a buy?

| More on:
Cannabis stocks have fallen.

It’s easy to pinpoint when the current cannabis roller-coaster ride fired up. While momentum had been bubbling throughout last summer in the pot stock space, it was the VP debate that kick-started the latest round of speculation. The words “We will decriminalize marijuana,” spoken by VP pick Kamala Harris, lit up the markets and sent cannabis stocks soaring.

A very 2021 investment thesis

Joe Biden’s fraught electoral victory has been attended by a resurgence of bullishness in the green stuff. A full-throated bull run is intoxicatingly close, as this week on the markets has shown investors. But will the feeding frenzy last, or will it turn out to be more of a Sunday buffet? The outcome hinges on a starkly divisive political environment south of the border. But despite this week’s violent unrest, pot stocks are climbing on democrat wins. It could be a harbinger of things to come.

Up 36% in the last five days at the time of writing, Tilray (NASDAQ:TLRY) is not a stock to buy cheap right now. But there’s still upside to be squeezed from this name over the near-term, so momentum investors have a tough decision to make. For investors of a lower risk threshold, though, Tilray is overpriced. Indeed, if it was too rich for the asking price last week, it’s many times more so after the latest bull run.

The question for the uninvested right now is: “Should I buy on a pullback?” The answer lies in whether or not Tilray can go the distance as an eventual market leader. Because in the post-legalization cannabis space, characterized as it is by disappointment, investors are increasingly looking at building long positions. Whether there is value in the Aphria merger or not, only time will tell. And it’s not necessarily a sure thing.

The bottom line for pot stocks

As always, the focus is on revenues. But the pandemic has proven problematic for cannabis producers. The situation wasn’t helped by a preexisting piecemeal retail environment. The uneven legal marijuana outlook in the U.S. also leaves a sour taste, with the Biden bull thesis weakened somewhat by deep-seated political divisions. Such divisions have never been so visible as they were this week.

Not that investors seem to be looking that deeply into the situation. Aphria is up 23% in five days. Other players in this space are also seeing gains. Canopy Growth is up 21% this week, even after a holiday period that saw the producer cut ties with Canopy Rivers. Its option to snap up Acreage Holdings in the event of U.S. federal cannabis legalization no doubt appeals to Biden bulls.

But the real upside could lie elsewhere. Consider such names as CuraLeaf. This name has attracted somewhat less attention this week, despite a rosy outlook for the year ahead. Up 11%, CuraLeaf is an attractive alternative to Tilray and Aphria. With one-year returns potential of +110%, CuraLeaf could win big in the next 12 months if revenues are as strong as projected.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Victoria Hetherington has no position in any of the stocks mentioned.

More on Cannabis Stocks

Powder of Cannabis (Drugs), Analysis of Cannabis in laboratory.
Cannabis Stocks

Canopy Growth: Is There Budding Potential in the Cannabis Market?

Canopy Growth stock hit 52-week lows recently on news of needing to re-file on its BIoSteel business, so what now?

Read more »

Cannabis grows at a commercial farm.
Cannabis Stocks

What’s Happening With Cannabis Stocks in May 2023?

Cannabis stocks were up this week, as the market began to turn, but how long will it last, and is…

Read more »

Cannabis smoke
Cannabis Stocks

Are Cannabis Stocks a Good Buy in May 2023?

If you're going to buy cannabis stocks, these are pretty much the only two I would consider. Even so, you…

Read more »

edit Cannabis leaves of a plant on a dark background
Cannabis Stocks

Aurora Cannabis: Time to Light Up Your Portfolio?

Here's my take on whether Aurora Cannabis (TSX:ACB) is worth adding to a growth portfolio right now, given its growth…

Read more »

Target. Stand out from the crowd
Tech Stocks

These Undervalued TSX Stocks Are a Bargain in May 2023

If you're willing to bet on a rebound, these are the three TSX stocks I would consider first as they…

Read more »

A cannabis plant grows.
Cannabis Stocks

Tilray Stock Is Scraping 52-Week Lows: Will it Bottom Out Soon?

Tilray (TSX:TLRY) stock remains down 53% in the last year, but when will this company hit the bottom and start…

Read more »

Medicinal research is conducted on cannabis.
Metals and Mining Stocks

2 Canadian Stocks That Are Simply Too Cheap to Avoid

These two Canadian stocks have sunk lower and lower, which is why now could be the right time for long-term…

Read more »

Cannabis grows at a commercial farm.
Cannabis Stocks

1 Marijuana Stock I’d Buy Over Aurora Cannabis

Explore a promising marijuana stock that outshines Aurora Cannabis. Unveil the investment opportunity to boost your cannabis portfolio.

Read more »