Is it Time to Buy Cannabis Stocks?
Zacks Investment Research | Jun 03, 2020 03:27AM ET
At the beginning of 2020, things were really lining up for marijuana investors.
Somewhere between 10 and 20 US states were planning ballot measures that would expand access to medical and/or recreational marijuana production and sale in November. Public support was growing as we headed into a Presidential Election year – during which there tends to be larger voter turnout.
Unfortunately, those plans are mostly on hold for now. Collecting voter signatures for ballot issues during a period of self-quarantine and social distancing is all but impossible. Additionally, even with public opinion still heavily in favor of broader legalization, most voters and legislators simply have more important issues to deal with in the current environment.
Business closures, widespread unemployment and the arduous process of reopening the economy are taking center stage and marijuana legalization has temporarily become a bit player.
The Good News
The marijuana industry is arguably in better shape today than it was in 2019, and there are opportunities to buy many strong companies at a fraction of the value they were trading last year.
Many of the regulatory and supply issues that plagued the Canadian market during the first year of legalization have been worked out and hundreds of new retail stores are opening. In December, the second phase of Canadian legalization took effect as derivative products hit the shelves for the first time, producing a big sales boost.
There has been progress in the US as well, with the House of Representatives passing a bill that would allow banking access to marijuana companies and on the verge of passing a much wider legalization bill. Though those pieces of legislation face an uncertain fate in the Senate, it’s clear that the regulatory environment is shifting in favor of legal marijuana in the US.
Most US jurisdictions declared cannabis sales an “essential” business during the shutdown and sales have been booming. In fact, thanks to social distancing standards, it appears that many consumers who might have otherwise done business in the illicit markets have instead been patronizing licensed retail outlets or using delivery services.
In an unexpected but fortunate twist, the shutdown that has been painful for so many businesses has actually been positive for the marijuana industry.
It probably shouldn’t come as too much of a surprise that when millions of people find themselves largely confined to their homes with their work responsibilities reduced or eliminated, the demand for both THC and CBD-based cannabis products increased.
More . . .
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