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Why OrganiGram Holdings Shares Jumped Today

What happened

Shares of OrganiGram Holdings (NASDAQ: OGI) were jumping 11.7% higher as of 3:24 p.m. EST on Tuesday. Marijuana stocks in general received a boost after the U.S. House of Representatives Judiciary Committee announced on Monday that it plans to vote this week on proposed legislation to legalize marijuana in the U.S. As one of the financially stronger Canadian cannabis producers, OrganiGram enjoyed a bigger gain than most of its peers.

So what

It seems that investors were looking hard for a reason to buy beaten-down marijuana stocks after a series of disappointing quarterly updates last week. OrganiGram won't announce its fiscal 2019 fourth-quarter results until next Monday, but the company provided a preliminary update on Nov. 11 that caused its stock to sink.

Cannabis leaf on top of $100 bills

Image source: Getty Images.

But any enthusiasm over the House Judiciary Committee's actions could be getting the cart before the horse. Even if the proposed legalization bill sails through the committee and is approved by the full House, it still has to go before the U.S. Senate. And that could prove to be a tall hurdle.

Senate Majority Leader Mitch McConnell, a Kentucky Republican, hasn't shown any willingness thus far to bring marijuana legalization legislation to the floor for a vote. McConnell's home state of Kentucky is a leader in the hemp industry; he could view the legalization of marijuana as a threat for hemp businesses.

Now what

Investors shouldn't count on anything happening soon related to changes in U.S. federal laws regarding marijuana. For now, the focus remains on the Canadian cannabis market. 

OrganiGram will report dismal results next week with its Q4 update. But there are signs of better days ahead. The Province of Ontario plans to issue more licenses for retail cannabis stores, a move that should help the entire Canadian cannabis industry. OrganiGram should also benefit from the cannabis derivatives market cranking up in December. 

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends OrganiGram Holdings. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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