Why Canopy Growth Stock Popped Today
Key Points
President Trump may start the process of legalizing weed on Monday.
First step: Rescheduling the drug as "Schedule III."
Next step: Profit?
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Canopy Growth (NASDAQ: CGC) stock soared 17% through 12:50 p.m. ET Friday on some positive marijuana news out of the White House.
As The Washington Post reports, President Trump aims to reschedule pot in the near future. This is not quite "legalization", but it's apparently enough to get marijuana investors excited today.
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Image source: Getty Images.
President Trump's Christmas gift to marijuana investors
The Post cites six persons confirming Trump's plan: to issue an executive order instructing the Justice Department to reclassify marijuana as a Schedule III drug, more like "common prescription painkillers and other drugs" such as Tylenol with codeine, than like hard drugs such as heroin or LSD.
The Post's sources say this will happen in January. Other sources tell CNBC the President might sign his order as early as Monday. Either way, it might take a few months to implement the regulations and make the change official.
What would this mean for investors in Canopy Growth stock?
Rescheduling wouldn't legalize marijuana per se, but it would make it easier to do business in marijuana. Banks would feel more comfortable extending loans to and taking deposits from marijuana businesses. Those businesses would be allowed to deduct more expenses from their income taxes. All of this should lead to more (legal) demand for the marijuana that Canopy Growth produces.
Is Canopy Growth stock a buy?
All this being said, investors need to be aware that just rescheduling marijuana may not turn Canopy Growth into a profitable stock. Marijuana has been legal in Canopy's home market of Canada since 2018, yet the company has never earned a profit. It actually lost $416 million last year.
Marijuana investors are enjoying solid momentum behind their stock today. But without profits to support it, that momentum will inevitably fade away.
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Rich Smith 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.
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