Cannabis Industry is Booming; Don’t Miss the Buying Opportunities

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.

ACB Aurora Cannabis Inc. daily Stock Chart

Source: Finviz.com

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.

CGC Canopy Growth Corporation daily Stock Chart

Source: Finviz.com

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.

 

 

 

Cannabis Market has Huge Growth Potential; it Could hit $80 Billion in Eleven Years

Cannabis markets have been expanding at a substantial pace over the past two years since some U.S. states legalized recreational cannabis use. The emerging market’s future fundamentals turned significantly rosy amid increasing prospects for legalization of recreational cannabis in the United States at the federal level.

The use of medical Cannabis is allowed in all states while only ten states have legalized recreational cannabis for adults.

Source: marijuanaindex.com

The U.S. president has recently signed ‘Farm Bill’ to promote the agriculture sector, which many would believe paved the path for complete marijuana legalization at the federal level.

New York Governor saysLet’s legalize the adult use of recreational marijuana once and for all,” he said, adding that all prohibition has done jam up minorities in the criminal justice system. “We must also end the needless and unjust criminal convictions and the debilitating criminal stigma.”

The Canadian government has already legalized medical and recreational cannabis use all over the country. These moves have pushed big investors and tobacco companies to capitalize on increasing demand for marijuana from the emerging markets.

For instance, Tobacco giant Altria announced an investment of $1.8 billion in Cronos Group. The investment would give a 45% stake in the Canadian cannabis company. “Investing in Cronos Group as our exclusive partner in the emerging global cannabis category represents an exciting new growth opportunity for Altria,” said Howard Willard, Altria’s CEO, in a statement.

Analysts Expect Significant Upside for Cannabis Market

Following reports of legalization from the largest economies, analysts have raised their forecast for the emerging industry. Cowen’s Vivien Azer predicts this industry to grow to $80 billion in the U.S. in the next eleven years. Several startups have started exploring opportunities in this market while established companies are seeking to acquire small cannabis companies to expand their market shares.

We expect continued growth in newly established U.S. states, and more robust growth in Canada as more supply comes online, and new form factors hit the market,” Cowen analyst Vivien Azer said.

How Retail Investors can Enjoy Cannabis Market Expansion

Cannabis companies are listed on U.S. and Canadian stock markets. Therefore, retail investors can easily enjoy the boom of this industry. Crown analyst Vivien Azer has highlighted strong confidence in two Canadian companies: Canopy Growth and Tilray Inc.

Source: morningstar.com

Canopy Growth shares are currently trading around $30 a share – with the market capitalization of $9 billion. Vivien Azer believes that Canopy Growth is well positioned to capitalize on increasing demand; she has set the price target of $40 for Canopy Growth. Canopy has generated revenue growth of 32% in the most recent quarter, and the company expects to generate year over year growth in sales in the following quarters.

Bruce Linton, Chairman & Co-CEO, Canopy Growth saysWith global management infrastructure in place, the Company is building an international platform in order to drive medical market growth, which will in turn drive innovation applicable to recreational cannabis markets. This approach requires large-scale production capacity, value-add processing, diversified intellectual property, and clinical research – all things we have prioritized and invested heavily into this past quarter.”

Source: morningstar.com

Tilray, Inc. has also gained analysts confidence since it expanded the relationship with Sandoz (a subsidiary of Novartis). Its share price rose 221% in the past twelve months alone. Market pundits believe Tilray is set to expand its share in the medical cannabis market amid its relationship with Sandoz.