Cannabis Stocks Rally as Looser Regulation Expected

Cannabis stocks have experienced a significant surge as hopes for looser regulations in the industry grow. Many investors are excited about the prospect of potential federal legalization in the United States, generating optimism in the cannabis market. Amidst increasing public support and state-level legalizations, there is rising speculation that the overall regulatory landscape may become more favorable for cannabis businesses. This has boosted investor confidence and led to a significant increase in the value of cannabis stocks. Although uncertainties remain, the growing anticipation of future regulatory changes is fueling the upward momentum in the cannabis industry..

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The exact role the government should play in the regulation of cannabis—and by extension, cannabis stocks—has been a contentious topic for decades now. And generally, the government itself landed on the tightest possible regulation side and acted accordingly. Now, however, the tables seem to be turning, and that’s sending cannabis stocks on an upward slope to varying degrees in Monday afternoon’s trading session.

Already, the notion of heavy-handed regulation of marijuana seemed to be heading out the door, thanks to a report from the U.S. Department of Health and Human Services that recommended the U.S. Drug Enforcement Administration fundamentally alter its stance on marijuana. The new stance, suggested by HHS, called for the DEA to step down its rating on cannabis in general and make it more accessible to regular users. Follow that up with new calls for “progress on cannabis” from Senate Majority Leader Chuck Schumer, and that only helps matters. Cannabis stocks exploded accordingly, including Canopy Growth (NASDAQ:CGC), Aurora Cannabis (NASDAQ:ACB), OrganiGram Holdings (NASDAQ:OGI), Clever Leaves (NASDAQ:CLVR), and Tilray (NASDAQ:TLRY).

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Will this trend continue? There are some definite signs that it will, especially given Schumer’s remarks that call for “progress” even as they cite progress already made. If the SAFE Banking Act goes through, this will allow cannabis operations access to more financial tools, improving their own safety—a lot less cash needing to go through the system—and convenience as well. That’s a pretty big win for an operation that used to have to be largely conducted in back alleys.

Surges were pronounced but hardly universal. For instance, Tilray, a Moderate Buy, only gained just over 7% today. Meanwhile, Canopy Growth posted the highest gains at over 68%. Interestingly, though, it comes with 64.33% downside risk thanks to its average price target of $0.56 per share.

Disclosure

The government’s role in regulating cannabis has been a controversial topic. However, recent developments, such as a report from the U.S. Department of Health and Human Services recommending a change in the DEA’s stance on marijuana, and calls for progress on cannabis from Senate Majority Leader Chuck Schumer, have led to a surge in cannabis stocks. If the SAFE Banking Act is passed, it would provide more financial tools for cannabis operations. While some stocks had substantial gains, like Canopy Growth with over a 68% increase, there are still downsides, such as Tilray having a 64.33% downside risk.

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