Why Village Farms Stock Crushed It Today

What happened

Actions of Village Farms International (NASDAQ: VFF) were up 22.6% as of 3:50 p.m. EDT Friday. The cannabis and greenhouse products company didn’t announce any news, but several other developments were likely behind the big win for Village Farms.

A potential factor behind Village Farms’ jump was Statistics Canada’s release on Friday morning of data showing cannabis sales in Canada skyrocketed in March. In addition, the results of a study were announced Thursday that found that certain strains of cannabis could help prevent the novel coronavirus from entering host cells. In addition, Bank of America has reinstated coverage for the major cannabis producer. Canopy growth (NASDAQ: CGC) with a buy rating, which could be seen as a positive sign for the entire Canadian cannabis industry.

Image source: Getty Images.

So what

Statistics Canada data is probably the most important potential reason behind the surge in Village Farms today. While this data is for March and Village Farms has already released its first quarter results, the numbers bode well for Village Farms and its peers in the second quarter. There are more cannabis stores open in Canada now than there were in March and more openings are underway.

The news about the potential of cannabis to stop the spread of COVID-19 could be huge, but only if the results of the study are proven. This study, conducted by researchers at the University of Lethbridge and the University of Calgary, has not yet been peer reviewed. For now, investors need to be careful not to over-hope that cannabis will be the miracle drug that will defeat the novel coronavirus pandemic.

Why would an analyst’s positive orientation on Canopy Growth help Village Farms? Canopy is pretty much an indicator for the entire Canadian cannabis industry. Bank of America reiterated its belief that cannabis will be a high growth market in the long term. This type of endorsement from a top analyst isn’t just good for Canopy Growth, it’s also good for Village Farms and all of its peers.

Now what

Canadian marijuana stocks are not yet completely out of the woods. Key questions still remain, including how quickly the Canadian economy will recover from the COVID-19 pandemic. But with five consecutive quarters of profitability, Village Farms is expected to be the biggest beneficiary, assuming the cannabis industry rebounds strongly over the remainder of 2020.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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