North American cannabis index, which tracks U.S. and Canadian cannabis companies, hit eighteen months high as democratic senators plan to pass legislation to end the federal ban on marijuana.
Shares of the only large capped weed company, Canopy Growth (NYSE: CGC), rallied more than 7% on Wednesday, extending year-to-date gains to 82%.
GW Pharmaceuticals’ (NASDAQ: GWPH) stock price soared more than 44% on Wednesday after Jazz Pharmaceuticals (NASDAQ: JAZZ) announced to acquire the medical marijuana company for $7.2 billion in cash and stock.
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Shares of Canadian cannabis firm Aphria Inc (NASDAQ: APHA) soared more than 130% year to date amid speculations about the merger with Tilray, Inc. (NASDAQ: TLRY).
Investors are also showing confidence in Aurora Cannabis (NYSE: ACB); the price per ACB share surged by 29.04% from $10.19 to $13.15 over the last 30 days.
Cannabis stocks rally also gained momentum on expectations for increased institutional investments and strong growth forecasts for the upcoming years.
The government backing and positive forecasts adding to upside momentum
“Over the next six months, there’s an expectation of more capital coming into the industry because it will now be investable to institutional players, and institutional bankers will help bring more capital into the industry,” Tim Seymour, the founder, and chief investment officer of Seymour Asset Management, said.
The sharp cannabis stock momentum is also backed by double-digit growth expectations.
Cannabis sales in North America reached $18.1 billion in 2020, with expectations that sales will increase around 76% in the next five years to reach $39.1 billion levels by 2025, according to a recent Prohibition Partners report.
The government backing is the major catalysts for sales growth in the years ahead. Three senators, including Senate majority leader Chuck Schumer, said they would present “a unified discussion draft on comprehensive reform” in the coming months, and the passing of that bill will be a priority for the senate.
What’s more, American people also like to see cannabis legalization as Gallup poll in November hinted that 68% of Americans supported marijuana legalization.
