What happened
Several top Canadian marijuana stocks soared by double-digit percentages on Tuesday. Shares of Aurora Cannabis (NYSE: ACB) were up by 12.3% as of 3:08 p.m. EST. Canopy Growth (NYSE: CGC) stock was jumping 12.1%. Tilray's (NASDAQ: TLRY) gain for the day was in the same ballpark, with shares up 12.5%. Aphria (NYSE: APHA) lagged behind slightly, with the stock rising 10.6%.
Two of the biggest winners, though, were Cronos Group (NASDAQ: CRON) and Sundial Growers (NASDAQ: SNDL), with shares vaulting 16.8% and 22.6% higher, respectively.
What lit a fire beneath these Canadian marijuana stocks on the last day of 2019? There wasn't any major news today. Probably the biggest factor behind today's spike is that the Cannabis 2.0 market for cannabis derivative products is picking up steam. Most of the stocks that jumped also have double-digit short percentages of shares outstanding, so any upward movement can result in short-sellers closing out their positions, contributing to even greater increases in share prices.
Image source: Getty Images.
So what
All of the big marijuana stocks with big moves today have taken a shellacking in 2019, with the exception of Aphria, which fell only slightly during the year. The lack of an adequate retail infrastructure, particularly in Ontario, has presented a major obstacle for Canadian cannabis producers. However, the year is ending on a positive note; Ontario is taking steps to open more retail stores at the same time the Cannabis 2.0 market is shifting into gear.
There's a good reason for investors to be optimistic about the potential for these stocks in the Cannabis 2.0 market. Professional services organization Ernst & Young projects the market could reach close to 6 billion Canadian dollars by 2025.
It's still very early, though. Today's jump stems from anticipation and hopes, instead of hard sales numbers. Still, many investors could be justified in thinking that the 2019 sell-off for Canadian pot stocks could have been overdone, in light of the improving environment that should be on the way in 2020.
Now what
Watch for reports of how well sales in the Cannabis 2.0 market are going early in the new year. Aphria will be the first major Canadian cannabis producer to announce earnings results, on Jan. 14, 2020. Although those results are for the quarter ending in November and won't include any Cannabis 2.0 sales, the company's management could provide some insight into how the launch of its new products is going.
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Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
