Cannabis stocks received another boost in the middle of this week after Ontario announced 26 supply agreements with large producers and some smaller suppliers. Canopy Growth Corp. (TSX:WEED)(NYSE:CGC) was one such supplier. Its stock has surged 33% week over week. Aurora Cannabis Inc. (TSX:ACB) was also included. Shares of Aurora are up 28% over the past week.
Recreational cannabis will only be available online in Ontario following the October 17 legalization date. Wholesalers will not be able to make sales over-the-counter until April 2019. The PCs have also allowed municipalities an opt-out clause to prevent local sales. The pathway towards licensing and distribution must also be clarified and the PCs have vowed to consult with a number of key groups before moving forward.
The spark for cannabis stocks was reignited after Constellation Brands (NYSE: STZ), a New York-based alcoholic beverage supplier, announced an additional $5-billion investment in Canopy Growth. This represented a vote of confidence for the industry. It appeared to soothe an investing community that was anxious after the legalization date was announced. There is still uncertainty in how the roll-out will be executed across the provinces.
There is expected to be a flurry of demand when things kick off in the fall. With solely online sales in Ontario investors should expect the black market to play a role until wholesale retailers are permitted to enter the market in the spring of 2019.
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