Are Cannabis Stocks Poised to Light Up?

After the House passed the Marijuana Opportunity, Reinvestment, and Expungement (MORE) Act in December, paving the way for federal decriminalization of cannabis, and Democrats took control of the Senate in the Georgia runoffs, it looks like 2021 could be a big year for the cannabis industry. According to the National Conference of State Legislatures, 15 states and 3 territories have legalized adult-use of cannabis or stated their intent to do so, while another 36 states and 4 territories have greenlit the substance for medicinal use.

Despite the strides made towards legalization of marijuana in recent years, the industry behind it has struggled to meet investors’ high expectations, as profitability remains a distant dream for many cannabis companies. The mood within the industry has lightened significantly since the election in November though, with the announcement of the Tilray-Aphria merger further fueling a year-end rally for pot stocks.

As the following chart shows, 2021 is off to a good start for cannabis stocks, with each of the five companies considered here posting significant gains in the first two trading weeks of the year. Tilray and Aphria have led the cannabis rally ahead of their merger, which is expected to be completed in Q2 2021.