The marijuana sector saw a sharp decline last week amid the global sell-off. Due to concerns about the coronavirus outbreak across the world, the S&P 500 fell by 8.8% in the week ending on March 13. The outbreak has compounded the marijuana sector’s problems. The sector was already dealing with lower-than-expected demand, a thriving black market, rising debt, and a cash crunch. So, marijuana stocks saw a deeper correction. The ETFMG Alternative Harvest ETF (NYSE:MJ) and the Horizons Marijuana Life Sciences Index ETF (TSE:HMMJ) fell by 19.8% and 21.8%, respectively. After last week’s fall, MJ and HMMJ have lost 39.6% and 40% of their stock values YTD, respectively. Let’s look at prominent cannabis players’ stock performance.
On March 13, Canopy Growth (TSE:WEED) fell to a 52-week low of 14.38 Canadian dollars before closing at 15.17. Last week, the stock fell by 25.9%. Weakness in the cannabis sector caused the company’s stock price to fall. Earlier this month, the company announced that it would optimize its operations to align its supply depending on the existing demand. To learn more, read Canopy Growth Will Close Facilities and Cut Jobs. Also, the company entered into a financing agreement of 80.5 million Canadian dollars with TerrAscend Canada. After last week’s fall, Canopy Growth has lost 44.5% of its stock value this year.
On March 12, Aurora Cannabis (NYSE:ACB) fell to a 52-week low of 0.87 Canadian dollars on the Toronto Stock Exchange. However, on March 13, the stock rose 11.5% to 1.07 Canadian dollars, which offset some of the declines. Overall, Aurora Cannabis lost 31.4% of its stock value last week, which brought its YTD (year-to-date) stock price down by 61.6%. On the NYSE, Aurora Cannabis stock has fallen below $1 and might get delisted. To learn more read, Aurora Cannabis Falls 60% in 2020, Might Get Delisted.
There wasn’t any respite for other stocks either. Last week, Aphria (NYSE:APHA), HEXO, Cronos Group, and OrganiGram Holdings fell by 25.4%, 22.6%, 6.3%, and 15.2%, respectively. YTD, Aphria, HEXO, Cronos Group, and OrganiGram have lost 53.5%, 45.4%, 26.9%, and 2.8% of their stock values, respectively.
Will the Fed’s rate cut boost the cannabis sector?
Due to the disruption caused by the coronavirus outbreak, the Federal Reserve lowered its interest rates to essentially zero on March 15, as reported by CNBC. The Fed also announced a $700 billion quantitative easing program, which includes purchasing Treasuries and mortgage-backed securities. However, the initiatives didn’t boost investors’ sentiments. The S&P 500 futures fell 5% on March 15, as reported by CNBC.
The Trump administration declared national emergy on March 13 amid the coronavirus outbreak. I expect the coronavirus to have a negative impact on recreational cannabis sales. Also, marijuana legalization efforts could take a back seat right now. So, I don’t expect the Fed’s rate cut and its quantitative easing program to have much of a positive impact on marijuana stocks. I expect marijuana stocks to be under pressure in the near term.