Why Cannabis Stocks Are Surging To Close The Week: The Coronavirus Confusion
Cannabis stocks have been on a steady rise since Thursday morning, with all major U.S. traded ETFs, the ETFMG Alternative Harvest ETF (NYSE:MJ), the AdvisorShares Pure Cannabis ETF (NYSE:YOLO), the Cannabis ETF (NYSE:THCX), and the Amplify Seymour Cannabis ETF (NYSE:CNBS), up by double digits.
Interestingly enough, the main driver of this rally was an item reported by the New York Post on Thursday on information had been out for several days — Benzinga reported on it last week.
Certain strains of cannabis could help block ACE2 gateways, which the coronavirus uses to enter the human body, according to a study conducted by researchers from the University of Lethbridge in Alberta, Canada and published in the Preprints journal — which is not peer-reviewed.
This, the scientists suggested, could reduce the chances of contracting COVID-19 by as much as 80%.
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As mentioned above, the news about the Canadian study had been out for days.
So, why did stocks react on Thursday?
The answer relates to virality. Not in terms of health, but rather in terms of the internet: the NY Post article went viral, boosting many cannabis stocks.
But, there’s yet another caveat here: it seems CBD is the key ingredient allegedly helping combat coronavirus, the researchers suggested.
Since the NY Post talked about the general term "cannabis," stocks reacted to a potential lift in sales across the board.
In an industry note, Piper Sandler analysts said that "while the merit of the science is difficult to handicap, we believe this type of press could drive a surge in sales for consumers who may not yet have considered CBD as a health and wellness supplement.”
Despite the spike, Piper Sandler decided to keep its ratings, price targets and models for cannabis stocks in their coverage universe unchanged.
Earlier this month, Piper upgraded Aurora Cannabis Inc (NYSE:ACB) following strong quarterly results.
Lead image by Ilona Szentivanyi. Copyright: Benzinga.
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