Marijuana News Today: Supply Deals Help Keep Stock Rush Going

marijuana news today for 22 august
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Marijuana News Today

In the marijuana news today, we have the official release of which companies will be supplying Canada’s most populous province, Ontario, with marijuana come legalization on October 17.

For all the companies selected, this is a great feather in their cap as it grants access to the key market in Canada. Pot stocks that were on the receiving end of this good news saw their stocks increase across the board. (Source: “Marijuana stocks up after Ontario announces cannabis supply agreements,” CBC, August 21, 2018.)

It is worth mentioning that Ontario is in a bit of an interesting situation relative to other provinces across the country.

It had recently changed governments from a liberal one to a conservative party. This prompted a massive diversion from its old marijuana legalization course whereby sales of cannabis would be handled by the provincial government, with private enterprise serving as wholesalers.

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The new government scrapped that idea and instead pivoted to a private model. But there is a catch: private storefronts won’t be opening until April of next year, leaving a long gap between legalization and brick-and-mortar retail locations opening up.

While pot will be available online, the lack of storefronts is almost certain to impact sales numbers. This means that investors closely following financial statements and the like can expect to see a large boost come April 2019 when brick-and-mortar marijuana retail sales can begin in earnest.

What This Means for Marijuana Stocks Long-Term

The marijuana news today will have long-term implications for many of the pot stocks that were selected as suppliers…as well as for those that missed out.

Ontario is almost guaranteed to be the most lucrative market in Canada and being able to supply that market is going to bolster revenue significantly.

As such, expect the stocks of companies that are in on the supply agreement deals to see a passive boost in stock value for months, maybe years to come as it will help supplement their sales.

The other important long-term impact of this announcement is that it is setting up these companies—especially the larger ones—for a big breakout come April 2019.

The marijuana industry is often a game of horizons. The next big legalization push, bill vote, or medical breakthrough often dictates the shape of the market for weeks, sometimes months in advance. We’ve seen that play out for a good chunk of 2018 as legalization looms.

In this case, April will be a month that investors mark on their calendar. When the brick-and-mortar stores open up, expect to see a boost in sales on the next financial report. This, in turn, will lead to marijuana stock growth.

CGC Stock

The marijuana news today and the pot stock market are closely tied—for once—as we see weed stocks continue to climb, even as this morning’s trading is starting out a little lackluster.

Canopy Growth Corp (NYSE:CGC) has had a week to remember, certainly, up about 38% since last Monday.

Of course, this climb was precipitated by the company’s deal with Constellation Brands, Inc. (NYSE:STZ). The alcohol giant increased the size of its joint venture with Canopy Growth last week with a $3.8-billion investment.

Canopy Growth stock initially surged by about 30% in the aftermath of that deal, as Constellation raised its ownership stake of the company to 38%. Some have called the deal the biggest marijuana investment to date. (Source: “‘This is rocket fuel’: Constellation Brands spending $5 billion to boost stake in Canopy Growth,” Financial Post, August 15, 2018.)

Canopy was also included on the Ontario suppliers list, another great step forward for a company already flying high.

But the past two days have seen a slight pullback.

CGC stock dropped about eight percent yesterday and finds itself down another three percent in early-morning trading today.

This is to be expected as we’re likely to see a bit of pushback considering how fast CGC stock soared in the past few weeks. However, I don’t think that this will be anywhere near enough to wipe out the massive gains earned in August.

Aurora Cannabis Stock

Another company making investors giddy, Aurora Cannabis Inc (OTCMKTS:ACBFF, TSE:ACB), is facing a similar situation to CGC stock.

Aurora Cannabis stock also finds itself up over 40% since the beginning of last week, helped by the industry-wide jump that came about as part of the Constellation deal.

The company also found itself on the list of approved suppliers to Ontario.

Aurora Cannabis stock also dropped about five percent yesterday, and has started today off with a near four-percent drop.

But much like CGC stock, Aurora Cannabis stock is going to face a slight correction after such a massive bull run. This should not dissuade investors. There are more gains to come in the near future as legalization approaches, even if the industry is looking to cool off a bit after the latest massive spike in value.

CGC & ACBFF Stock Performances

Check out the chart below of the recent performances of the stocks of Canopy Growth Corp (black line) and Aurora Cannabis Inc (blue line).

Chart courtesy of StockCharts.com

Analyst Take

The marijuana news today adds more certainty to the future of Canadian marijuana legalization because we now know which companies will be playing in Canada’s largest market.

While Ontario will need to wait until April to really get going, being on that list is great news for the companies selected.

Meanwhile, the pot stock market is likely to see a bit of a pullback after its latest massive surge, but I doubt it will be long-lasting, nor will it suffice to wipe out the gains that were made since last week.