Cannabis industry has been growing at a massive pace over the last year. The market has been witnessing the emergence of several new players following the legalization of recreational cannabis in Canada and in some parts of the United States. Indeed, some biotech companies have also been moving their focus towards cannabis industry. This is because of the strong growth prospects of the emerging industry.
Market participants expect cannabis sales to reach $200 billion level in the next ten years. The market has already started seeing significant sales growth opportunities in the past couple of quarters. Consequently, these companies have been aggressively working on merger and acquisitions combined with investments in supply chain and other activities to capitalize on increasing demand.
Aurora Cannabis (NYSE:ACB), for instance, has made 16 strategic acquisitions in the last two years. In addition, the company plans to acquire more companies in the coming days to expand its footprints in emerging markets. Aurora has also been boosting its production capacity; it expects cannabis production to reach 500000 kg by 2020 from 100000 kg at the end of fiscal 2018.
Its cannabis products sales, on the other hand, rose substantially in the previous few quarters. In the latest quarter, its net revenue of $54 million increased 430% from the same period last year and it is up almost 83% from the previous quarter.
The share price of Canopy Growth (NYSE:CGC) rose more than 100% in the past twelve months. The gains are supported by its aggressive growth strategy along with investor’s confidence in future fundamentals of the emerging industry. Its revenue grew 283% in the latest quarter compared to past year period while kilograms and kilogram equivalents of cannabis sold jumped 334%. Canopy Growth has also secured $5 billion investment from Constellation Brands Inc and began putting that capital for key acquisitions of Storz & Bickel and the assets of ebbu Inc.
Several other cannabis companies such as CannTrust Holdings, Aphria, and MedMen Enterprises had generated more than 100% increase in revenues in the latest quarter.
On the whole, the cannabis industry is likely to see considerable growth in revenue in the future. Therefore, buying and holding major cannabis stocks that have the potential to generate sizeable growth in production and distribution appears like a good strategy.