Aurora Stock Pops on Hope of Federal Marijuana Legalization

The MORE Act would decriminalize marijuana at the federal level and allow SBA support for cannabis entrepreneurs

Just days after a trading bloodbath that battered Aurora Cannabis (NYSE:ACB), a development in the U.S. Congress helped ACB stock post a 3% gain on Tuesday and a nearly 13% surge yesterday.

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The House of Representatives may vote on the MORE Act as early as  today. The legislation would decriminalize marijuana at the federal level.

If both houses of Congress pass the bill and it’s signed by the president, the legislation would obviously be good news for marijuana stocks.  Not surprisingly,  ACB stock wasn’t the only cannabis stock that rallied on the news.

However, this is far from the first time that legislation of this sort has been introduced this year. Even if it does pass the Democrat-controlled House, there’s no  guarantee that it will make it through the Republican-controlled Senate, where it will likely need 60 votes to pass.

Congress to Vote on the MORE Act

California Senator (and Democratic Presidential candidate) Kamala Harris introduced the MORE Act in the upper chamber on Tuesday, In addition to decriminalizing cannabis,  the bill would  allow states to set their own policies on the issue.

Furthermore, the bill would permit physicians affiliated with the Veterans Administration to prescribe medical marijuana to veterans who live in states in which the substance is legal. The MORE Act would also clear the records of those who have been convicted of minor, non-violent marijuana-related crimes, while those who are currently incarcerated for such crimes would have the opportunity to seek a lighter sentence.

The bill goes beyond decriminalization. It also allows the Small Business Administration to provide support for entrepreneurs and small businesses that enter the cannabis sector.

Aurora Stock Pops on the News

Other cannabis stocks also climbed tremendously in the wake of the developments in Congress. For example, Canopy Growth (NYSE:CGC) jumped 7.8% on Tuesday and 15% yesterday, while Chronos Group (NASDAQ:CRON) gained 9.12% on Tuesday and 15% yesterday.

But… We’ve Been Here Before

While the MORE Act appears to have momentum, it’s worth noting that there have been other efforts this year to pass legislation that would legalize marijuana at the federal level. Obviously, those previous attempts failed. And Senate Majority Leader Mitch McConnell, a Republican, has a history of opposing pro-cannabis legislation.

The Bottom Line on ACB Stock

It’s possible that the MORE Act will end up passing Congress. Anything is possible. It’s more likely that it will be passed by the House and die in the Senate, but in the meantime Aurora Cannabis stock has had a much-needed boost.

That doesn’t change the fact that ACB stock has proven to be a terrible performer that is now down about 75% from its March highs. Its slump has largely been caused by the failure of the legalized cannabis market in Canada to take off as expected. The company’s fiscal Q1 earnings report — featuring a 100% decrease in its earnings per share, excluding some items, versus the previous year — resulted in a bloodbath. But Aurora CEO Terry Booth summed up the big picture:

“Despite short term distribution and regulatory headwinds in Canada that have temporarily impacted the industry, the long-term opportunity for Aurora in the global cannabis and cannabinoids market is immense.”

Even if the MORE Act fails to pass, the action on the bill is another indication that the tide is turning in the U.S., with pressure for federal legalization mounting. In addition, the Canadian cannabis market is finally showing signs of life. It may get uglier for marijuana stocks before it gets better, but the long-term prospects for companies that survive the current turmoil are good. Even after Friday’s miserable performance, analysts polled by CNN Business have  an average rating of “buy” on Aurora stock, and their median 12-month price target is 72% above yesterday’s closing price of AXB stock. In the meantime, cannabis investors should keep a close eye on headlines about the MORE Act because the legislation is already having a big impact on ACB stock in particular and marijuana stocks in general.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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