Pot stocks have entered a bull market, and analysts are attributing it to the resurrection of Aurora Cannabis (NYSE: ACB) and impressive earnings from Curaleaf.
Since doing a 12-1 reserve split last Monday, the former cannabis industry darling Aurora Cannabis has experienced a strong bull rally.
The market surged even further on Monday as Curaleaf Holdings reported record first-quarter 2020 financial and operational results. Curaleaf reported revenue of $105 million, a 29% increase over the last quarter.
It’s been a tumultuous few years for marijuana stocks. After surging to historic highs in the mid-2010s, pot stocks have had mixed results. The summer of 2019 delivered plenty of bad news for the industry, sending many popular pot stocks plummeting.
Aurora Cannabis is one of the industry’s largest producers, and its stock price has had a similarly tumultuous run. In 2016, you could buy a share for under $4 USD. By the end of 2017, ACB had hit a high above $90. By early 2018, the stock reached its all-time high above $128. The stock plummeted to $59 in summer 2018, peaked again in 2018 and 2019, but has steadily declined ever since.
On March 15, 2019, ACB was valued at $115 per share. By May 2020, ACB had hit a multi-year low under $9 per share. That’s why investors are welcoming this latest rally.
On May 11, Aurora Cannabis did a 12-1 reverse split. Investors weren’t impressed, claiming that reverse splits rarely work. They seemed right at first, as ACB dropped from $7.50 post-split all the way back down to $5.60. Then, Aurora reported its earnings, and the stock has been on a bull run ever since.
Before the reverse split, Aurora had about 1.3 billion shares. After the split, they now have around 108 million. As reported by Marijuana Stocks, Aurora had 102 million shares traded on Friday.
On May 18, the stock jumped 56%, rising from $10 to above $18 before ending the day at $17.10. Other pot stocks experienced similar gains.
Curaleaf Releases Record Earnings Report
Curaleaf announced impressive earnings for the first quarter on May 18. Although markets were closed in Canada for the Victoria Day holiday, Curaleaf (CNSX: CURA) had already jumped 12% on Friday in anticipation of the earnings report, and it seems poised to jump higher when markets reopen Tuesday.
Curaleaf impressed analysts with record total revenue of $96.5 million, a 28% increase. The company also reported EBITDA of $20.0 million, a rise of 45% sequentially.
Curaleaf also closed a $300 million senior secured term loan facility, opened the company’s second adult-use dispensary, and won retail and processing licenses in Utah, among other achievements like launching Nano Gummies.
Quarantine Leading to Surge of Marijuana Sales
It’s no mystery why marijuana companies are reporting impressive earnings: sales of alcohol and weed have surged as high as 50% in many regions. According to Nielsen, alcohol sales were up 55% in the week ending March 21, while legal states reported record pot sales.
According to the cannabis analytics company Headset, pot sales in California jumped 56% on Monday compared to the previous four Mondays. Other states reported similar spikes.
The big question is if pot stocks can continue this momentum post-quarantine – or if the rally will fizzle as demand returns to normal.