When a major player in a given industry performs really well, it can often set the stage for the shares of others in the same industry to rise also. This is called a sympathy play. And it just happened in the Canadian cannabis industry…
Last Friday, Canopy Growth (NYSE:CGC) announced fiscal 2020 third-quarter results that were much better than expected. The big Canadian cannabis producer delivered positive surprises in nearly every category. Its stock immediately jumped in the double-digit percentages and is still up 11% over the last three trading days.
But there are also other big winners. Here are three marijuana stocks that road Canopy’s Q3 earnings coattails and just might rise even higher.
1. HEXO
HEXO stock soared 18.9% on Friday after Canopy Growth’s tremendous Q3 update. That was an even bigger jump than Canopy itself. HEXO’s shares are still up 13% since last Thursday.
You might wonder why HEXO performed so well as a result of Canopy’s news. After all, the business models of the two companies are quite different. HEXO’s main market is Quebec, while Canopy claims a broader-based market across multiple provinces. Canopy is a key player in Germany’s medical cannabis market, while HEXO isn’t.
Probably the best answer to this question is that HEXO has been one of the biggest losers among marijuana stocks in recent months. It whiffed big time with its Q4 results, announced in October. Its management team lost a lot of credibility after promising that it would double its revenue from Q3 to Q4, then not coming close to achieving that prediction.
But sometimes the stocks that fall the hardest are the ones that bounce back the most when there’s positive news. Canopy’s Q3 results brought a fresh air of optimism to investors who had become jaded about the cannabis industry. That optimism seems to have especially provided a boost to HEXO.
2. OrganiGram Holdings
Shares of OrganiGram (NASDAQ:OGI) are up more than 10% since the stock’s close prior to Canopy Growth’s Q3 update. Unlike HEXO, OrganiGram does have a clear connection with Canopy. The two companies inked a two-year supply and distribution agreement in 2018 for serving the adult-use recreational marijuana market in Newfoundland and Labrador.
But OrganiGram already had its own good news last month. The company announced fiscal 2020 first-quarter results that were much better than expected. It delivered quarter-over-quarter revenue growth of 55%, a lot higher than Canopy Growth achieved in its latest quarter. And unlike most of its peers (including Canopy Growth), OrganiGram reported…
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