According to recent reports (via ArcView, Marijuana Business Daily, and New Frontier), U.S. legal marijuana sales are on track to reach $8.5 billion in 2016. While those numbers are impressive, the reality is that they are somewhat misleading. The problem is that a lot of those sales are coming from states that don’t report anything to the federal government, so there is no data available for the federal government to use for their own pot numbers.
Marijuana stocks have had a rough couple of years. Despite the significant legal hurdles, the market for legal marijuana globally is huge. And the industry is growing. But it’s not growing fast enough to keep up with demand.
Legal cannabis sales continue to rise in the United States, but the stocks of the companies that make up the legal cannabis industry have been sputtering. In the first quarter of the year, U.S. cannabis sales rose to $6.7 billion, a 26% increase from the previous quarter, according to BDS Analytics. As of the first three months of 2018, the total US market for legal cannabis was $9.2 billion.. Read more about is green thumb industries a good investment and let us know what you think.
The second-quarter earnings season is coming to a close. Who is the major winner? The cannabis business in the United States.
Some of the biggest cannabis businesses in the United States recently announced another quarter of record revenues. In fact, I’m not aware of any other industry that is expanding at such a rapid pace. The finest reports are included here.
- Revenue for Ascend Wellness (OTC: AAWH) increased by 236 percent year over year.
- Curaleaf Holdings’ (OTC: CURLF) sales increased by 166% year over year.
- Green Thumb Industries’ (OTC: GTBIF) sales increased by 85% year over year.
- Revenue for Harvest Health and Recreation (OTC: HRVSF) increased by 84 percent year over year.
You’d think that with these sorts of numbers, stock prices would skyrocket. The cannabis industry, on the other hand, is still in a bear market.
MSOS, the Advisor Shares US Cannabis ETF, has dropped 35% from its 52-week high.
US Cannabis ETF 12-Month Chart Advisor Shares (MSOS)
Investors are naturally curious as to why the sector is declining while the industry is obviously growing. Three causes for the recent retreat are listed here, as well as a prediction for what to anticipate next.
3 Things to Consider When Investing in Cannabis Stocks
Stocks in the cannabis industry are still digesting gains from 2020.
In 2020, the cannabis industry saw a massive uptick. Green Thumb Industries (GTBIF), for example, is one of the biggest cannabis businesses, with a share price that has risen by over 1,000 percent from its 52-week low in 2020. Green Thumb is now down 20% from its 52-week low, but shares are still up over 600% from the COVID bottom in March of 2020.
When a sector climbs this dramatically in such a short period of time, it’s only normal for shares to pause and reset before starting another rise. We believe the cannabis industry is now in this period.
The market is dissatisfied with the slow pace of cannabis reform.
Cannabis stocks soared after the Democrats won control of the White House and Congress, as investors anticipated major change. So far, though, virtually nothing has occurred.
Because of its high tax rate, Chuck Schumer proposed a federal cannabis bill that died on the vine. The SAFE Banking Act, which would relax cannabis banking restrictions, was approved by the House for the fourth time in April, but is still stalled in the Senate.
Further out, I believe that substantial cannabis reform will occur over the next 12 to 24 months. For the time being, the market is dissatisfied with the slow pace of change.
Stocks in the cannabis industry move in cycles.
The cannabis industry has a long history of optimistic and bearish trading cycles. Historically, these periods have lasted anywhere from three to twelve months.
In 2020, cannabis stocks experienced significant gains, and now is the time for the industry to reset. For the last six months, cannabis stocks have been stuck in a bear market. This indicates that the sector is considerably closer to the bottom than the peak of the bear market.
What Can We Expect in the Future?
Curaleaf Holdings (CURLF), Green Thumb Industries (GTBIF), and Cresco Labs are among the biggest cannabis businesses in the United States, and I remain quite enthusiastic about their prospects (CRLBF).
Despite enormous legal and regulatory restrictions, the sector is now generating tremendous sales growth.
I believe that strong drivers like as federal cannabis reform, more states legalizing cannabis, and more revenue growth will help the industry in the future. While the industry is facing short-term challenges, I see this bear market as a chance to purchase cheap.
About the Author & Cannabis Stock Trades
Michael Vodicka is a stock analyst with over 20 years of trading and investment expertise. His work has been published in some of the industry’s most prestigious journals. Since 2013, he has been investing and guiding investors in the cannabis industry.
Members of Cannabis Stock Trades benefit from Mr. Vodicka’s knowledge and advice.
Join Cannabis Stock Trades for unique research, trade alerts, and a model portfolio from Mr. Vodicka.
The U.S. cannabis industry looks like it’s here to stay—and it’s not just because of the legalization of marijuana for recreational use in some states. As the world’s largest market for legal marijuana, it’s also all about supply and demand. Despite the recent surge in shares, they have not reflected the growing demand for cannabis (so far, this year, at least). Read more about gtbif stock forecast and let us know what you think.
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