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Reddit Posts Trigger Increase in Cannabis Stocks

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by Ibukun Ogundare · 3 min read
Reddit Posts Trigger Increase in Cannabis Stocks
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Wall Street is not particularly bullish on cannabis companies. Only 2 out of 14 analysts have a buy rating on Tilray.

Cannabis stocks surged in reaction to Reddit users who have shifted attention on some groups of canopies companies. The Reddit users fueling the surge in cannabis stocks, WallStreetBets Reddit army, are the same group of people that caused the recent spike in GameStop Corp (NYSE: GME). 

On the 10th of February, shares of selected cannabis companies soared as the Reddit trading community bet that the new Democratic administration legalizes the plant. Currently, the use, possession, or sale of cannabis more than 0.3% THC is illegal in the US under federal law.

According to a CNBC report, four companies recorded gains due to attention received from the WallStreetBets Reddit army. They are Tilray Inc (NASDAQ: TLRY), Canopy Growth Corp (NASDAQ: CGC), Aurora Cannabis Inc (NYSE: ACB), and Aphria Inc (NASDAQ: APHA).

In reaction to the Reddit trading army community bet, Tilray advanced 50%, pushing its year-to-date increase to over 670%. Also, Canopy Growth soared 6%, reaching over 110% gain since the beginning of the year. Aphria jumped 10%, adding to 280% recorded in its year-to-date gain. In addition, Aurora Cannabis spiked 20%, reaching over 20% in its year-to-date record.

Cannabis Stocks Rally

At the time of writing, Tilray is up 10.89% to $70 in the pre-market. The company has also grown nearly 143% in the last five days. Canopy Growth stock is currently trading at $53.71% with an increase of 2.95% over its previous close of $52.50. Additionally, Aphria has grown more than 9% over its previous close and currently trading at $28.85%. Aurora Cannabis stock is also up 8.62% in the pre-market. The company has gained 37.60% in the last five days.

Speaking to CNBC on the Reddit frenzy, an analyst at Cantor Fitzgerald, Pablo Zuanic, said:

“We believe the rally in Canadian names is mostly driven by retail investors, maybe fueled by Robinhood and Reddit, that’s really piling into the Canadian cannabis names in particular. I’m not going to say it’s a GameStop type of case but the Canadian rally is not entirely based on fundamentals. But when we talk to clients we tell them [to be] careful trying to short these Canadian names because you know what happened with GameStop on the way up.”

Notably, GameStop has declined more than 5% since it peaked at $347.51% on the 27th of January.

Stating FactSet, CNBC revealed in the report that Wall Street is not particularly bullish on the cannabis companies. Only 2 out of 14 analysts have a buy rating on Tilray. Also, two out of 20 analysts that cover Canopy Growth rated the stock a buy. Also, 7 analysts out of 11 who cove Aphria have a buy rating on the stock.

Reddit users are, however, bullish on cannabis stock. A user posted on the social media platform:

“Weed about to make me a millionaire in 2021.”

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Ibukun Ogundare

Ibukun is a crypto/finance writer interested in passing relevant information, using non-complex words to reach all kinds of audience. Apart from writing, she likes to see movies, cook, and explore restaurants in the city of Lagos, where she resides.

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