Marijuana stocks surged more than 8% Thursday, enjoying their best day of 2019 as measured by one popular exchange traded fund (ETF), in the wake of several developments seen as bullish for the sector.
The marijuana-focused Alternative Harvest ETF (MJ) closed up 8.15% on the session — buoyed by a slew of positive earnings reports from U.S. multi-state operators, advancing pro-marijuana legislation in the House, and reports of more dispensaries potentially gaining approval to open in Ontario.
Thursday’s jump marked the best single-day win for the ETF since it gained more than 8.2% in October of 2018. Yet in spite of that move, the fund is still down about 30% for the year.
Meanwhile, shares in Canadian cannabis giants Canopy Growth (CGC) and Aurora Cannabis (ACB) both advanced by about 15%, after Bloomberg reported that Ontario officials were considering a plan to remove its slow-moving lottery system.
If approved, it would provide legal dispensaries with a plan that would allow for up to 1,000 additional pot shops. The province currently has 24 stores operating, with roughly another 75 planned for approval.
Last week, both Canopy and Aurora complained about the shortage of approved, legal dispensaries in Ontario in their quarterly earnings.
On Friday, Canopy CEO Mark Zekulin told Yahoo Finance’s YFi PM that “there are not enough stores in Canada to sell our products. If you look at Ontario and Quebec, 60% of the population have access to 10% of the stores and if there are not [enough] stores to sell your product no matter what other decisions you’re making it’s very hard to take on the black market.”
According to Cowen analyst Vivien Azer, 75 previously planned stores were already projected to boost Canada's total annual cannabis sales from CA$1 billion to about C$4 billion ($1.33 to 5.3 billion).
Additional stores on top of that would “have a substantial impact” on Canada’s total addressable market, though she acknowledged there could “be a point where incremental doors become increasingly cannibalistic and maximizes the potential revenue opportunity in the province,” she wrote.
Cannabis stocks in the U.S. had already been trading higher on the back of positive legislative updates and strong earnings reports from multi-state operators Curaleaf and Green Thumb Industries earlier this week. On Wednesday, the House Judiciary Committee voted to approve and advance a bill that would decriminalize and tax marijuana at the federal level for the first time in history.
Despite slim odds of the legislation being approved by the Republican-controlled Senate if it makes it through the House, Curaleaf CEO Joe Lusardi celebrated it as a reason for optimism.
“That’s a historic day in Congress for cannabis,” he said, noting that it’s the second big cannabis vote to support changing federal marijuana laws in this country. Last month, the House also passed the so-called SAFE Act, a banking bill that would allow banks to work with cannabis companies without fear of violating federal law.
“On the back of the SAFE Act passing with very broad bipartisan support those all bode well and create a tailwind on the regulatory front,” Lusardi said.