To The Moon

On Thusday trading day, $AdvisorShares MSOX 2X Daily ETF(MSOX)$, a leveraged fund, rose 38.75%. $MSOX tracks the $AdvisorShares Pure US Cannabis ETF(MSOS)$ , which was up 14.8%. $Canopy Growth Corporation(CGC)$ , $Tilray Inc.(TLRY)$ , $Cronos Group Inc.(CRON)$ rose 25.76%, 11.28%, and 9.63% respectively.

Why Are Cannabis Stocks Up Today?

• Cannabis companies are rallying for their second day in a row after the Department of Health and Human Services recommended moving marijuana to a less harsh drug schedule—as the drug currently shares the same federal classification as heroin, ecstasy and LSD despite being legal in many states.

• The U.S. Drug Enforcement Administration is considering a move on marijuana be rescheduled to a Schedule III drug that would open the substance to interstate trade.

• Rescheduling would not fully legalize the drug nationwide, but it would classify it as a substance with moderate to low abuse potential, resulting in less restrictions on scientific marijuana studies and aiding the cannabis industry with lower tax rates.

• Back in October of last year, President Biden had called upon the U.S. Department of Justice and HHS to review how cannabis was scheduled under federal law.

• While there is no guarantee of eventual action, the ramifications of any action are quite significant, may have a direct financial impact to their bottom lines,and cannabis stocks have been too cheap for far too long.

Are Cannabis Stocks A Buy?

1. $Canopy Growth Corporation(CGC)$

Weekly Chart

• Canadian cannabis producer $Canopy Growth Corporation(CGC)$ is focusing on the US cannabis market and implementing cost-cutting measures to improve its bottom line.

• The company spent $297.5 million to acquire Wana Brands and an undisclosed amount to takeover 100% of Jetty Extracts shares, to aid its entrance into the US Cannabis market.

• On August 17th 2023, Canopy Growth sold off its Hershey Drive facility back to Hershey USA for $53 million to further cut costs and strengthen the company's balance sheet.

• Canopy Growth reported in Q1 FY 2024 of $109 million CAD (Up 3% YoY) with a net loss of $42 million CAD. Gross margins turned positive to 5% thanks to improvements in the Canada cannabis and Storz & Bickel segments.

• The increasing legalization of cannabis in the U.S. and the potential passage of the SAFE Banking Act could benefit Canopy Growth. Canopy Growth shares may have bottomed and could rebound as we head into Q3 and Q4 2023.

2. $Tilray Inc.(TLRY)$

• Pharmaceutical cannabis firm Tilray Brands, which sports a $2 billion market cap, saw its share price climb 11.2% on Thursday and close at $2.96, after trading as low at $1.52 just two months ago.

• The maker of marijuana products and craft beer purchased eight beer and beverage brands from Budweiser parent Anheuser-Busch InBev (BUD) in August, the purchase will strengthen its craft beer offerings and help the company diversify.

• Since August, Tilray's stock price has broken above the 50-DMA on high volume and is now above the 200-DMA, giving long-term investors positive hope.

3. $Cronos Group Inc.(CRON)$

• Cronos Group, headquartered in Toronto, Canada cultivates and sells medicinal and recreational cannabis through its medicinal brand, Peace Naturals, and its two recreational brands, Cove and Spinach.

• Earnings: Net revenue of $19.0 million in Q2 2023 decreased by $2.6 million from Q2 2022. The decrease was primarily due to lower cannabis flower sales in Israel due to competitive activity.

• The Company has decided to discontinue providing net revenue guidance and to withdraw our previously announced net revenue target of $100 to $110 million for full-year 2023.

4. ETF- $AdvisorShares Pure US Cannabis ETF(MSOS)$

Weekly Chart

• The MSOS ETF offers diversified exposure to major multi-state operators. Their stocks are exceedingly cheap, with most of the top operators trading at between 5x and 7.4x adjusted EBITDA.

• This rally barely made up for the brutal losses suffered over the past two years. It is always shocking to see many stocks in an entire sector soar 15%, 20%, or even 30% in just a couple of hours. That just illustrates how impactful potential legislative reform could be for the US cannabis operators. Even after the run-up, stocks of the largest operators continue to trade at compelling valuations.

• There remains the risk that the DEA does not react positively to the recommendation from the HHS and that pricing compression continues to negatively impact the sector. But for investors looking for a catalyst-driven entry point into the cannabis sector, this appears to be an opportune moment, given that there may now be a positive headline loop until the DEA issues its decision.

• Among others, $Green Thumb Industries Inc.(GTBIF)$ and $NewLake Capital Partners, Inc.(NLCP)$ also some strong buys in the US cannabis sector.

Related sources for this article:

• https://seekingalpha.com/article/4629609-canopy-growth-buy-this-cannabis-stock-before-legalization

• https://seekingalpha.com/article/4632263-msos-cannabis-stocks-soar-on-hhs-recommendation-to-reschedule-buy-these-stocks-now