Why pot stocks are going up in smoke today

Why pot stocks are going up in smoke today
Why pot stocks are going up in smoke today

What happened

Pot stocks take it on the chin yet again today. As of 2:01 p.m. ET Thursday afternoon, shares of Aurora Cannabis (PBR -6.25%) decreased by 6.8%, canopy growthit is (CCG -4.35%) equity was under 6.8%, OrganiGram Holdings(OGI -2.80%) the stock price was 4.25% lower, and Tilray Brands (TLRY -5.79%) had lost another 6.32% of its value.

Over the past five trading sessions, Aurora Cannabis, Canopy Growth, OrganiGram Holdings and Tilray Brands have fallen more than 10%. For the year, these four pot stocks were all down more than 40%.

Image source: Getty Images.

So what

Two issues seem to be weighing on these four Canadian pot stocks lately:

  1. Last Monday, the White House said it “had nothing more to add” on the subject of marijuana legalization during a press briefing. The topic arose when a reporter asked White House press secretary Karine Jean-Pierre if President Biden was ready to deliver on his campaign promise to decriminalize cannabis. To date, the administration has largely avoided this burning issue in order to make progress on more pressing agenda items such as climate change, university loan forgiveness and inflation. In short, the Biden administration seems unwilling to put legalizing marijuana at the top of its priority list.
  2. Last Friday, Federal Reserve Chairman Jerome Powell said more interest rate hikes were on the way to keep inflation in check. As a result, stocks have fallen significantly over the past week in response to this news. Pot stocks were particularly hard hit by the announcement, as investors seem unwilling to hold these cash flow negative companies ahead of a potential economic downturn. Aurora Cannabis, Canopy Growth, OrganiGram and Tilray Brands all posted net losses in their most recent fiscal quarters.

Now what

Should investors start fishing deep in this battered space? It’s a tough call to make. Aurora Cannabis, Canopy Growth and Tilray Brands are all set to benefit from the eventual legalization of adult recreational marijuana in Germany. Additionally, OrganiGram has proven to be a savvy operator. In fact, the company’s craft cannabis brands have been rapidly gaining market share in recent quarters.

That being said, this bear market seems to care only about profitability – a feature that has largely eluded these four companies thus far. Simply put, the market can continue to punish these four pot stocks until their businesses start generating profits consistently. That doesn’t necessarily mean investors shouldn’t start snacking on these names, but stakeholders must certainly be willing to hold on to them for the long term.

George Budwell has no position in the stocks mentioned. The Motley Fool fills positions and recommends OrganiGram Holdings. The Motley Fool has a disclosure policy.

The article is in French

. why the stocks pot leave smoke today

. pot stocks smoke today

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