Canopy Growth Corp (TSX:WEED)(NYSE:CGC) has fallen 17% in just the past month and it closed at less than $50 on Wednesday, which is a two-month low for the stock. Aurora Cannabis Inc (TSX:ACB)(NYSE:ACB) has been on a similar path, as it has dropped 15% during the same time period.
Pot stocks have been trading at premiums for some time, so it may not be a surprise that we’re seeing some corrections take place. However, the markets as a whole have struggled recently, and these recent sell-offs may not be indicative of a correction happening in the cannabis industry, but of trends that we’re seeing at the macro level.
While I don’t think that cannabis stocks are good value buys, I still think they will bounce back from this. Canopy Growth and its peers are still enjoying what I’d call the honeymoon phase of the new industry, and it won’t be for at least another quarter when we can start comparing actual sales to expectations. And it’s only then that I would expect reality to set in and any big corrections to take place.
This is also not new territory for pot stocks, as we saw some big sell-offs happen early on in the year. It may seem like a distant memory when Canopy Growth was trading at just $24 back in February, but it’s come a long way since then. In the case of Aurora, its stock was trading at a little more than $5 per share just a few months ago.
Cannabis stocks have been very volatile, and this roller coaster should be nothing new for investors. It doesn’t mean that the stocks are destined to soar, but I don’t think we’re headed for the bottom just yet. Speculative buyers might still be able to take advantage of these dips in the market.
