The national recreational cannabis market is growing. According to Statista, global cannabis investment is estimated to cross $63.5 billion by 2024, representing a compound annual growth rate (CAGR) of 21%. With such promising development, it’s no surprise that commercial marijuana stocks have piqued the attention of many investors.
When the legalization of cannabis becomes more widespread, the industry as a whole has fared well throughout the quarantine period. Since not every marijuana-related business is a success, determining the best ones can be a remarkably stable way to diversify your long-term assets with the benefits of a profitable market. States are continuing to regulate marijuana this year while the cannabis industry prepares the federal government to introduce cannabis legalization laws in the upcoming years.
Day traders and swing traders, in general, favor this market instability because it allows them to profit from price swings. On the other hand, the same uncertainty makes long-term investments in top marijuana stocks difficult right now. In this article, we’ll list topics to help you decide whether you should invest in cannabis stocks and what top marijuana stocks you should look into.
- Cannabis Industry at a Glance
- Should You Invest in Cannabis Stocks?
- Top Marijuana Stocks You Should Look Into
Cannabis Industry at a Glance
Cannabis is one of the highest markets in the United States and around the world. Following a solid start to 2021 with substantial price growth, the marijuana market started to lose momentum following February 10, 2021. These price declines have lowered the starting point for potential entrants into some of the strongest pot stocks to buy in 2021.
After New York legalized cannabis in March, Virginia and New Mexico followed suit in April. Many of these new economies are now seeing tremendous growth in the marijuana industry. Before beginning a stake in top cannabis companies, there are a few aspects that investors should be aware of. For one thing, pot stocks have a reputation for being among the most unpredictable in the industry.
According to a 2019 poll, 12 percent of Americans use cannabis regularly. However, as per the United Nations, 192 million people used marijuana globally in 2018. Furthermore, a weed data provider stated that Generation Z saw a 127 percent increase in revenue from 2019 to 2020, compared to just 5% for boomers. It may be attributed to Gen Z entering the industry daily, but the pandemic has influenced older generations’ ability to buy.
When the COVID-19 pandemic approached in 2020, the pot industry has seen an increase in internet sales. In 2020, major trends like online shopping, curbside collection, and distribution helped shoppers get their items easily and safely. According to Eaze, new distribution user sign-ups increased by almost 60% in the 30 days following a national emergency declaration on March 13, 2020.
In addition, according to the State of the Cannabis Industry, stores that allow customers to buy ahead of time sell 22 percent higher on average than stores that do not. Quite unexpectedly, weed e-commerce tech firms like Dutchie saw a significant expansion of the business in 2020.
What You Should Expect
By 2025, the marijuana industry in the United States is expected to be worth $30 billion a year. Given the legalization of cannabis in 33 states and Washington, D.C., and the legalization of marijuana services in 11 states and Washington, D.C., cannabis is prohibited on the national level.
The marijuana industry may quickly enter into new markets as cannabis legalization campaigns spread throughout the country, and some members of Congress call for reform and even federal regulation. Shareholders will return in 2021, driven like a moth to light by a 65 percent surge in the marijuana market in the United States in 2020. Since the American stock exchange remains challenging to enter due to the government prohibition, 2021 will most likely see more SPAC-driven ventures coming to pass. We’ll all continue to see the emergence of stable-growth, homegrown businesses.
Furthermore, whether or not the SAFE Banking Act passes in 2021 would have the most effect on the marijuana market. Banking is among the most important market features for all businesses, but the cannabis industry has been denied access to it, limiting its growth.
Should You Invest in Cannabis Stocks?
With all of the hype about the cannabis market and the growing acceptance of cannabis’ validity, the industry is expected to boom. Because of the vast variety of possible advantages and therapeutic methods offered by cannabis, the industry could grow both recreationally and medicinally due to legalization.
Many areas of the economy have also been affected by the coronavirus pandemic, which has resulted in significant loss of income. States in the United States are gradually recognizing the amount of tax revenue that cannabis can produce. The closest illustration is Illinois: It authorized recreational marijuana on Jan. 1, 2020, and revenues of $40 million that month soared to $87 million by December, taking the year-to-date figure to $1 billion.
Marijuana’s legality in Canada requires cannabis firms to trade on the country’s stock exchanges openly, and many U.S. and Canadian marijuana companies are also publicly listed on US trading platforms. If regulation spreads, more firms will opt to list on stock exchanges, improving the sector’s overall fortunes. Legalization will also help these businesses with more funding. Since weed is still banned under federal law, most banking sectors are wary of assisting cannabis businesses.
Decriminalization would provide these businesses with increased access to finance, allowing them to flourish in the United States and internationally. The European cannabis industry is also profitable, with a compound annual growth rate of 29.6%, expected to reach $37 billion by 2027. Despite the lack of full legalization, making it impossible for them to get financial assistance, they kept expenses down, increased earnings, and used some clever growth tactics to achieve profitability.
How to Invest
To make a successful investment in the cannabis industry, you should first understand the different types of marijuana products available today. It’s essential to note the two categories of weed items, which are medical and recreational cannabis. The former is widely accepted in various states in the US and more than 30 countries worldwide.
However, to obtain medical marijuana, one must have a prescription from a licensed medical professional. This category is usually prescribed to individuals suffering from stress, anxiety, and more. The latter, on the other hand, has a very limited scope. Recreational cannabis is only accepted in 17 states in the US. Purchase of recreational marijuana also requires several verifications.
Aside from these, investors must be aware of the different types of marijuana stocks available today. To give you a glimpse, there are three primary stocks in the market today, cannabis-focused biotechs, cannabis growers and retailers, and providers of ancillary products. It’s also important to know the risks of investing in such an unpredictable industry, such as the cannabis market.
Top Cannabis Stocks You Should Look Into
For the past few years, Altria has a rough patch. In the last five years, the portfolio has returned just 1.7 percent on an annualized basis. Its stock has suffered in recent years due to write-downs on its $12.8 billion 2018 expenditure in e-cigarette manufacturer JUUL Labs. In exchange for 35 percent of the firm, the investment came with a slew of complications. Altria has marked off 88 percent of its funding so far.
The National Informatics Center (NIC) provides resources to assist governments with using the Internet to deliver services to individuals and enterprises. It is the leading provider of automated government applications, websites, and secure billing in the United States. NIC also provides a forum for federal approval and oversight of the marijuana industry.
NIC reported on February 10 that it had negotiated to be purchased by Tyler Technologies Inc. (TYL) in an all-cash deal that amounted to approximately $2.3 billion.7 NIC represents over 7,000 federal, state, and local authority departments across the United States. Tyler Technologies is a supplier of advanced information and infrastructure systems to federal agencies at the city, national, and national levels. The deal could be completed in the 2nd period of 2021.
Trulieve Cannabis Corp.
Trulieve Cannabis is a holding firm that deals with medicinal marijuana production, processing, selling, and distribution. Seizures, joint pain, irritation, fatigue, lack of appetite, and other signs characterized by severe medical problems such as cancer are treated with drugs.
The corporation has 83 locations throughout the United States, with 78 of them in Florida, serving over 450,000 clients. Trulieve recently completed its acquisition of Mountaineer Holding LLC, which will provide Trulieve with an extra production license and two new pharmaceutical approvals. Trulieve purchased Mountaineer for $6 million in cash upfront.
Curaleaf Holdings launched in New Jersey in 2010, and it produced one of the very first vapes to deliver a single dose of medical marijuana. Arizona, Florida, Illinois, and Massachusetts are among the 23 states where it runs. It has 104 dispensaries, 23 production sites, and 30 manufacturing locations. Curaleaf is now on the way to becoming one of the world’s largest marijuana businesses, thanks to its use of technology to improve the consumer experience.
Medical cannabis is now legal in 36 states, and Washington, D.C. 16 states and the District of Columbia have allowed adult-use marijuana, with New York being the most recent to do so. Curaleaf will keep expanding organic traffic and through transactions as more states permit adult use.
The Bottom Line
The cannabis industry’s payoff is not a temporary phenomenon, considering mainstream use, societal acceptance, and the inevitable drive toward regulation at the national level. However, the market will continue to be fraught with danger unless the drug is made legal under federal legislation in the United States.
After the national government decriminalizes marijuana, the market would continue to be risky for buyers, with individual securities and investments showing much greater uncertainty than stocks in more developed sectors.