Shares of cannabis companies traded broadly higher Wednesday, as U.S. midterm elections are likely to usher in a green wave, with Michigan voting to legalize recreational pot and other states supporting medical marijuana likely just the beginning.
The ETFMG Alternative Harvest exchange-traded fund MJ, +2.28% jumped 3.3%, with 28 of 37 components trading higher, putting it on track for a seventh straight gain. The sector tracker has now run up TK% during its win streak.
The Horizons Marijuana Life Sciences ETF HMMJ, +3.70% rallied 2.4%, also headed for a seven-day win streak.
Among the most-active stocks, Aurora Cannabis Inc. ACB, +2.43% rose 3.4%, Canopy Growth Corp. CGC, -0.05% tacked on 1.8%, Cronos Group Inc. CRON, +0.33% gained 1.6% and Tilray Inc. TLRY, +14.46% ran up 18%.
Michigan became the 10th state — and the District of Columbia — which voted to legalize marijuana. Although South Dakota voted down a measure to legalize pot, Missouri and Utah voters supported legalizing it for medicinal use.
But that’s not all. Democrats winning a majority in the House of Representatives for the first time since cannabis liberalization began marks “a fundamental shift in the U.S. legislative landscape which could usher in a period of positive cannabis reform,” GMP Securities analyst Robert Fagan wrote in a note to clients.
“For instance, Dems will now gain majority control of the powerful House Rules Committee, which previously acted as a dogged gatekeeper of positive cannabis reform for the past 2 years under the oversight of anti-cannabis Republican Pete Sessions,” Fagan wrote, with Sessions losing his House seat from Texas to Democrat Colin Allred.
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“In our view, these midterm results combined with a strong pipeline of upcoming catalysts should serve to drive a decoupling of valuation multiples for the U.S. cannabis sector to eventually reach a premium over Canadian LP peers,” Fagan wrote.
Canaccord Genuity analyst Bobby Burleson said he believes Michigan is a “particularly important market” given the state’s population. He estimates Michigan’s marijuana market to grow from a value of about $856 million in 2018 to $1.3 billion in 2022.
Gubernatorial wins by a pro-cannabis candidate in Illinois and by the first Democrat in Nevada since 1994 should be viewed as wins for U.S.-based cannabis companies.
Among U.S. companies poised to benefit from Illinois and Nevada results, according to Burleson, shares of MedMen Enterprises Inc. MMNFF, +3.72% rallied 3.6% and Planet 13 Holdings Inc PLNHF, +1.76% hiked up 1.8%.
In other pot stocks, shares of Toronto-based Namaste Technologies Inc. NXTTF, +3.15% gained 2.8% after the company said its Cannmart Inc. subsidiary signed an agreement with AgMedica Bioscience Inc. to buy medical cannabis from AgMedica to sell on Cannmart’s online platform. AgMedica is a licensed producer of medical cannabis under the Access to Cannabis for Medical Purposes Regulations (ACMPR), which holds cultivation and sales licenses.
MariMed Inc.’s stock MRMD, +5.45% rallied 5.7% after the Massachusetts-based manager of cannabis facilities said it named Charles Finnie, most recently a senior research analyst at Roth Capital Partners, its chief strategy officer, to head up its merger-and-acquisitions, investment and investors relations strategies.
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Elsewhere, shares of GW Pharmaceuticals PLC GWPH, +3.92% rallied 3.9%, Aleafia Health Inc. ALEAF, -5.47% fell 6.3%, Green Organic Dutchman Holdings Ltd. TGODF, -4.11% shed 2.9%, Hexo Corp. HYYDF, +2.25% advanced 2.7% and Supreme Cannabis Co. Inc. SPRWF, +4.96% advanced 5.0%.
The ETFMG ETF has now run up 33% over the past three months and the Horizons ETF has soared 36%, while the S&P 500 index SPX, +1.75% has lost 20%.