Tilray rose 25% on Wednesday, bringing total gains year to date to more than 530%, while shares of a handful of other cannabis stocks also surged. According to CNBC, the surge was fueled by the Reddit trading community betting on the federal legalization of cannabis under the new Democratic administration.
- Canopy Growth gained 4%, adding to its 100% rally in 2021, Aphria surged 10%, while Aurora Cannabis rose by 11%.
- Analysts believe the rally in Canadian names is mostly driven by retail investors and not entirely based on fundamentals.
- The move to pot stocks could also be related to high short interest ratios.
- The pending merger of Tilray and Aphria is also considered in the current Reddit frenzy.
- Goldman analyst David Kostin believes the gains for popular Reddit stocks are related to a strong start to the year for small caps and a surge of new special purpose acquisition companies.
- Despite Reddit traders seemingly buying the pot names, only two of the 14 analysts covering Tilray have a buy rating on the stock.
- Of the 20 analysts covering Canopy Growth, only two recommend buying the stock, while seven out of 11 analysts have a buy rating on Aphria.
Cannabis stocks are currently gaining. TLRY is up 15.07% on premarket, APHA is up 10.90%, WEED is up 6.19%, ACB is up 14.53% on premarket.
