Marijuana ETFs Bounce Back: Can The Rally Last?
Zacks Investment Research | Nov 21, 2019 08:00PM ET
It’s been a volatile journey for marijuana stocks over the past few days. A handful of downbeat earnings ravaged the space last week only to offer a much-needed, legislation-related boost this week. Shares of marijuana companies rose on Nov 21 after a MJ added more than 8% on Nov 21. The fund also advanced 0.2% after hours.
The latest bill will enact a 5% federal sales tax on marijuana products that are manufactured in or imported into the United States and obliterate past criminal records. The latest approval comes two months after the “House passed a bill to advance legislation that would allow banks to provide services to cannabis companies in states where it is legal,” per Reuters.
Some Upbeat Earnings Releases
Apart from the legislation, a few upbeat earnings have also driven the space. Innovative Industrial Properties Inc. (NYSE:IIPR) , which is focused on the acquisition, ownership and management of specialized industrial properties leased to experienced, state-licensed operators for medical-use cannabis facilities, breezed past Wall Street's operating expectations in the third quarter.
GW Pharmaceuticals Plc (NASDAQ:GWPH) , a biopharmaceutical company focused on developing and commercializing therapeutics from its proprietary cannabinoid product platform in a broad range of disease areas, beat on both lines in the September quarter.
Will the Rally Last?
Analysts are still doubtful about the near-term prospects of the space. The these stocks are now sell-in-the-strength detritus .”
Tilray, Cronos and Aurora Cannabis shares have all per MarketWatch . Notably, borrowing fees for shares of Apple (NASDAQ:AAPL) and Tesla (NASDAQ:TSLA) were 0.3%, per the source.
Still, something is better than nothing. And the latest bill marks a positive development “for sentiment toward heavily-shorted cannabis equities, which have been battered by Canadian market oversaturation , as investors shift focus toward opportunity in the U.S., the world’s largest cannabis market (one-third of global demand),” per a CFRA analyst. Still, an approval by the full House and Senate should take time and will likely see a lot of revisions in the process.
Against this backdrop, investors can keep a close tab on marijuana ETFs like AdvisorShares Pure Cannabis ETF (LON:YOLO) (up 5.3% on Nov 21), Cambria Cannabis ETF POTX (up 10%).
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