Lately, Canada-based diversified cannabis, hemp and cannabis device company Canopy Growth Corporation CGC has been grabbing investor attention. The stock has surged 171% over the past three years, a trajectory that investors can only dream of. While this little-known stock has created a loud impact on the investment world, it is time for us to wake up to the latest buzz in healthcare — cannabis or marijuana.
It has been more than a year now that medicinal and recreational use of cannabis or marijuana has been legalized in Canada. Although the U.S. federal law has been quite restrictive in prohibiting the use of marijuana to date, it has been legalized in 33 states, District of Columbia, Guam, Puerto Rico and U.S. Virgin Islands (the State Medical Marijuana Laws).
Following Germany’s legalization of the same in 2017, Europe too has witnessed a change in stance in terms of legalization cultivation and export of cannabis of late. Portugal, Denmark, Poland and the UK are four other EU nations that have allowed the practice of medical cannabis. From 2020, France too will execute a trial run on medicinal cannabis.
While the legalization of medical cannabis is progressing, illegal sales of marijuana in the United States are currently estimated to be $70 billion, seven times the size of the legal market (New Frontier Data). Consequently, market watchers believe that this industry’s growth is likely to be the largest within the healthcare space in the long run.
Let us delve deeper.
Cannabis stocks witnessed incredible gains in 2017 and 2018. Following the successive legalization in Canada and the United States, the industry received a boost after gaining significant support from the aged population. Going by a Gallup report, 66% of Americans now support legalizing marijuana, a new high in Gallup’s trend over nearly half a century. Per Gallup, only 12% of the population supported this in 1969.
In 2018, the population sentiment related to marijuana adoption witnessed a change in the landscape, following GW Pharmaceutical’s lead drug Epidolex, a cannabidiol (CBD)-based oral solution, which gained FDA approval for two rare and severe forms of childhood epilepsy, Lennox-Gastaut syndrome and Dravet syndrome. The approval worked wonders for the space with Cannabidiol once again becoming the focal point of discussion in the investment world.
These developments led to a number of advancements in terms of cannabis investment. While Tilray TLRY was the first marijuana IPO in 2018, Cronos Group CRON was the first marijuana stock to list itself under Nasdaq. Canopy Growth on the other hand, became the first marijuana stock to enter New York Stock Exchange (NYSE). Not only this, Canopy Growth became the first cannabis stock in history to have a large-cap valuation.
Going by a 2019 Motley Fool report, in fact, “marijuana firmly shed its taboo label and became a legitimate business model last year.”
In 2019, marijuana stock growth momentum was largely affected by oversupply of production. Many market watchers also believe that the Centers for Disease Control and Prevention (CDC) data, which stated 800 vaping-related lung injury cases, led investors to take a back seat in terms of buying cannabis stocks.
Despite these adversities, a 2019 Gallup Poll claims a gradual increase in the medicinal usage of cannabis in the United States. Per the report, currently a significant 14% of Americans say they use CBD products and this number is expected to rise significantly in the coming years.
Undoubtedly, the cannabis industry is a rewarding space for the investors who are looking for longer term gains. Going by a Wall Street forecast (published in a Motley Fool article), the ongoing legalization of cannabis is expected to help yield anywhere between $50 billion and $200 billion in worldwide weed sales per year by 2030. A 2019 Cowen & Co. estimate claims that in the United States alone, marijuana sales could reach as much as $80 billion by 2030, if the federal government legalizes the plant.
As trading of cannabis products is becoming more and more easy, here are three companies that investors may watch out for.
Aphria Inc. price | Aphria Inc. Quote
Zynerba Pharmaceuticals, Inc. price | Zynerba Pharmaceuticals, Inc. Quote
The estimate revision trend for this Zacks Rank #3 (Hold) stock has been favorable. Over the past three months, the Zacks Consensus Estimate for the stock has improved 8.8% for 2019.
GW Pharmaceuticals PLC Price
GW Pharmaceuticals PLC price | GW Pharmaceuticals PLC Quote
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