After dropping 15% on Tuesday, Canopy Growth Corp (CVE:CGC, TSE:CGC) stock shot up with a 20% rebound on Wednesday, marking another change of fortune in the unpredictable marijuana production market.
The roller coaster that many of these marijuana producers—including Canopy Growth—have been riding recently shows no sign of slowing down, as the CGC stock share value rebounded yet again, demonstrating that the market has by no means settled yet.
Take, for instance, the news from Canada’s Minister of Veterans Affairs Kent Hehr that the Canadian federal government will limit reimbursement for military veterans using medical marijuana from 10 grams per day to three grams per day. The average patient uses about one to three grams a day, according to Health Canada’s web site. (Source: “Marijuana stock sell off as Veterans’ Affairs enacts new restrictions,” Financial Post, November 22, 2016.)
This announcement followed an investigation into marijuana producers allegedly price gouging the Canadian government by offering veterans exclusively expensive options, increasing the cost to the government. (Source: “High Prices: The cost of medical marijuana benefits for vets has jumped 5000% in Canada,” VICE News, November 16, 2016.)
Ottawa has set the limit for its reimbursement program at $8.50 per gram, based on what it said was “fair market value.” The changes will also allow veterans to claim reimbursements for cannabis oil and fresh marijuana in addition to the dried product. About 3,000 veterans partake in Canada’s medical marijuana program.
While Canopy Growth was never specifically implicated in the price hiking scheme, the share value of CGC stock took a hit all the same. But, of course, Wednesday was a different story, with investors bouncing back into the hot weed market.
Canopy Growth states that only about two percent of its clientele is comprised of veterans.
All that controversy seems to have flown by the wayside as Canopy Growth had another strong day of, well, growth.
The weed market is certainly budding but, as we’ve tackled multiple times this week, the question is less of whether it will grow, but of how high it will rise, and at which price level CGC stock should realistically be valued.
Excitement and hype are great for driving a trend but, at the end of the day, investors should keep an eye on where CGC stock will top (or bottom) out.