Three Key Reasons Pot Stocks could Double, if not TripleAugust 26, 2018
We’ve been pounding the table on pot stocks for quite some time.
And for good reason. They’re all part of one of the biggest economic booms this country has ever seen. Look at Canopy Growth (CGC) for example. Since May 2018, it ran from $20 to $45. Even Tilray Inc. (TLRY) just ran from $22 to just under $44. Even here, pot stocks offer some of the greatest opportunities for long-term growth. In fact, we wouldn’t be shocked to see many of these top names double, if not triple over the next five years.
All on three major catalysts.
Catalyst No. 1 — Americans Support Legalization
A growing majority of Americans fully support its legalization, which has led to its decriminalization and the potential for significant cash inflows.
- In 2017, Colorado’s marijuana industry generated $1.3 billion in sales and $200 million in tax revenue. It’s also helped create 18,000 jobs just in this state.
- Washington State could generate up to $155 million in marijuana related taxes this year. By 2022, it could generate more than $1 billion.
- California could see $5 billion in revenue from recent legalization. Recreational sales here could soon double the size of the marijuana market.
- In Nevada, the projection is a whopping $6 billion, while Massachusetts is estimated to see around $1.5 billion in gross sales. Maine is projected to enjoy $290 million in gross sales annually. In Florida, legalization could generate up to $2 billion in annual sales. North Dakota could see $75 million just starting out.
- New Mexico already allows for its medical use but could expand laws, as well, especially to help reduce the state’s massive budget deficit. Within the first year of such sales, estimates say the state could see $60 to $70 million added to the state budget.
In addition, another 15 states are pushing for legalization, too.
We can clearly see there are plenty of economic benefits that are too good to pass up.
Millions of people could soon have full access to legal marijuana, creating a sizable supply-demand crunch, sending marijuana prices and stocks skyrocketing.
But that’s just in the United States.
Catalyst No. 2 — Canada will Legalize Marijuana on October 17, 2018
Recently, the Canadian Senate overwhelmingly passed Bill C-45, also known as the Cannabis Act, which legalized the use of recreational marijuana. The law goes into effect on October 17, 2018. While it’ll take Canadian provinces a few weeks to ramp up for likely demand, the law opens a sizable market.
By 2021 analysts say Canada could have nearly four million recreational marijuana users, creating a monstrous $4.5 billion industry. The industry could balloon to $8.7 billion shortly thereafter, as marijuana retail sales just in Canada are likely to surpass beer, wine and spirit sales combined. That’s big money.
In short, this approval could set off another boom.
“This is a multibillion-dollar industry going from black to white,” says Vahan Ajamian, an analyst with Beacon Securities in Toronto. “It’s like the end of alcohol prohibition in the US.
It’s a once in a generation kind of investment opportunity.”
Initially, Canada is expected to face a pot shortage. Business Insider recently noted, “There’s [a] potentially crippling shortage of marijuana in Canada.”
Despite capacity expansion by the country’s growers, most have staggered completion dates for their key projects that range between the summer of 2018 and the end of 2020.
But we believe this is just the start to a bigger boom.
By 2021 analysts say Canada could have nearly four million recreational marijuana users, creating a monstrous $4.5 billion industry. The industry could balloon to $8.7 billion shortly after, as marijuana retail sales just in Canada are likely to surpass beer, wine and spirit sales combined. That’s big money.
Catalyst No. 3 — Corporate America is Waking up to the Opportunity
Constellation Brands just increased its stake in Canopy Growth (CGC) by $4 billion — part of the reason CGC exploded in recent days. That comes just 10 months after Constellation first took a 10% stake in Canopy to help create nonalcoholic cannabis-infused drinks and other products.
Constellation’s investment in Canopy — the biggest known deal in the marijuana industry — shows just how far traditional alcoholic beverage companies are willing to go to find growth. As sales of beer fall in the United States, brewers have begun to bet that legalization of marijuana around the globe, especially the United States, will continue to build momentum and sales of cannabis products will take off. Legal sales alone could be worth $47 billion within a decade, note analysts at RBC.
Molson Coors even listed legal cannabis among the biggest possible risks to its business in its annual shareholder report.
“The emergence of legal cannabis in certain U.S. states and Canada may result in a shift of discretionary income away from our products or a change in consumer preferences away from beer,” they noted.
In short, Canopy may not be the only company to see a major investment from similar companies.