Cannabis stocks jump on anticipated order to reclassify marijuana

Cannabis stocks are outperforming on Friday following reports that President Donald Trump will significantly ease federal restrictions on marijuana, with an executive order seen as coming as soon as Monday. Roth Capital told investors that President Trump’s expected push for the government to loosen federal restrictions on marijuana is now “imminent.”

MARIJUANA RESTRICTIONS: U.S. President Donald Trump is anticipated to urge the U.S. government to loosen federal restrictions on marijuana in a major way, cutting oversight of the plant and its derivatives to the same level as some ordinary prescription painkillers and other medicines, the Washington Post’s Jacob Bogage and Dan Diamond report, citing six people familiar with the discussions. The president has discussed the plan with House Speaker Mike Johnson and is expected to aim to broaden access to the drug through an upcoming executive order that directs federal agencies to pursue reclassification, the authors note.

CNBC’s Alex Harring and Brandon Gomez reported that an executive order could come as soon as Monday, sending stocks of several cannabis names higher in Friday trading. Publicly traded companies in the space include Aurora Cannabis (ACB), CV Sciences (CVSI), Canopy Growth (CGC), Cronos Group (CRON), Goodness Growth (GDNSF), Green Thumb Industries (GTBIF), IGC Pharma (IGC), Tilray (TLRY), Trees Corporation (CANN) and Trulieve Cannabis (TCNNF).

IMMEDIATE UPSIDE: Roth Capital writes that President Trump’s expected push for the government to loosen federal restrictions on marijuana is now “imminent”, while the Supreme Court is set to decide if it will hear a case on state regulations vs. federal prohibition, which may accelerate cannabis regulatory timelines. While Roth continues to expect a significant amount of clarifying language to accompany any change in Scheduling, the firm believes that the Cannabis group stands to see “immediate upside” upon the announcement of the change. Roth also notes that at 5.7-times expected EBITDA, the group trades significantly below previous 2021 highs of about 17-times on enterprise value to expected EBITDA basis.

CANNABIS REFORM: Lucid Capital upgraded NewLake Capital Partners (NLCP) to Buy from Neutral with a price target of $16, up from $14, citing reports that indicate that President Trump is “finally ready” to direct his administration to follow through on the campaign promise to reschedule medical use of cannabis to a less restrictive category under the Controlled Substances Act. Given this positive momentum on reform, the firm believes investors should “revisit” NewLake given its valuation compared to its peer group of cannabis REITs.

PRICE ACTION: In Friday trading, Aurora Cannabis jumped over 14%, CV Sciences surged more than 15%, Canopy Growth soured about 34%, Cronos Group gained 8%, and Tilray outperformed more than 28%.