With surging sales and overflowing opportunities, the cannabis industry has become a powerful driver of economic growth…
There is a bright side to recessions.
As difficult as conditions get, people still don’t stop working to improve their lives.
It’s a human imperative that is as fundamental to who we are as a species as great works of art and music. And it’s an imperative that ultimately drives reinvention and progress.
So, while 20 to 30 million unemployed Americans is a tough number to stomach, one bright sector of the economy will help many of those affected reinvent their careers – cannabis.
Leading companies like Cresco Labs Inc. (OTC: CRLBF), Curaleaf Holdings Inc. (OTC: CURLF), and Green Thumb Industries (OTC: GTBIF) are proving that cannabis legalization is a key part of getting people back to work and getting the economy back on its feet.
These companies are still selling. They are still building. And they are still hiring.
1. Surging Revenues Despite Shut-Downs
Across the entire economy, no other sector is growing at 30% to 50% per year in the face of economic contraction brought on by stay-at-home orders. For top cannabis companies, that translates to revenues surging 200% to 300% per year.
Results like these prove that cannabis stocks are defensive. Not only have cannabis sales been unaffected by economic contraction, but they have surged.
Take the leading cannabis company in Michigan as a prime example, where sales have climbed 100% higher from January levels.
The fact is that legal cannabis sales are up across the country, with 30% to 40% revenue growth per month in many places.
And this incredible growth, made possible by legalized marijuana sales, is getting the attention of politicians.
2. Pressure to Rapidly Accelerate Legalization
[RELATED READING] With the legalization of cannabis, states could generate millions and even billions of dollars. Here’s how COVID-19 is making the case for full cannabis legalization.
I’ve always maintained that federal legalization is inevitable. But given the current state of employment, the rapidly building pressure to legalize will force congress’s hand. Politicians can’t afford to dither on the sidelines while unemployment claims continue to pile up.
They can’t fiddle while Rome burns.
People want to work, and legalized cannabis provides a solution. One that doesn’t require tax dollars to make it happen. All politicians have to do is get out of the way.
The revenues, capital investment, and job growth will spur politicians to rapidly advance legalization far more quickly than I ever imagined possible just a few short months ago.
And while surging revenues and accelerating legalization are pulling investors into cannabis stocks, nothing draws them in faster than profits.
3. A Wave of Profitability
“The stage is set and the time to be in cannabis is now.” – Don
For the better part of a year, the cannabis industry has desperately needed to tighten its belt.
In general, expenses have far outstripped revenues. And because cannabis companies had a hard time raising capital last year, many were right-sizing their expenses long before COVID-19 struck.
This was a blessing in disguise. The ones that worked the hardest are now well positioned to grow profits in line with their remarkable revenue growth.
In fact, of the 50 largest cannabis companies by market cap, I wouldn’t be surprised to see half of them achieve profitability over the next 12 months.
It’s the prospect of profits that is already getting the market’s attention.
Greenlane Holdings Inc. (Nasdaq: GNLN), a cannabis house of brands, is up 147% from its March 18 lows.
GrowGeneration Corp. (Nasdaq: GRWG), a supplier for cannabis cultivators, is up 100% over that same period.
And Tilray Inc. (Nasdaq: TLRY), a leading Canadian licensed producer (LP), is up 231%.
Meanwhile, the S&P 500 Index has rallied 35%.
But this is just a start.
Given the confluence of factors converging on cannabis right now, I fully expect the stock prices of the top cannabis companies to trade 5 or even 10 times higher 12 months out. Wall Street is sniffing at the edges and legalization will clear a path.
The stage is set and the time to be in cannabis is now. I encourage you to click here to make sure you own the cannabis stocks in the best position to deliver life-changing profits.
Don Yocham, CFA
Executive Director, National Institute for Cannabis Investors
According to Advisory Board member Danny Brody, the cannabis market may just have a perfect storm on its hands – the kind where valuations are cheap, market capitalizations are low, and the time to buy could be right around the corner. Access Danny’s strategy for the summer market…
14 responses to “Three Powerful Forces Are Converging on the Cannabis Industry”
May 20 2020