It’s a clear sign that Wall Street expects the business of legal pot to become a rapidly growing chunk of the consumer products pie.
Demand for marijuana — as well as CBD, the non psychoactive products derived from the hemp and cannabis plants — is robust.
Bull run for cannabis may only be in its infancy
The pot stock gold rush comes at a time when a growing number of states are legalizing recreational and/or medical marijuana. Some industry watchers are hopeful that federal laws against cannabis may eventually be relaxed.
“Support for legal marijuana is the highest it’s ever been in the US across several different demographics. The pandemic has only sparked increased appetite in the space,” said Brad Neuman, director of market strategy at Alger, in a report this month.
“This widespread legalization at the state level suggests the possibility of legalization on the Federal level in the US,” he added, noting that “companies involved in the cannabis space … may hold significant investment opportunities in the years to come.”
Driessen added that the overall cannabis and CBD markets remain so fragmented that there is still a lot of room for several companies to keep growing and gain share.
The ‘canna-curious’ could become the next wave of new customers
There will likely be even more companies entering the fray as more states legalize cannabis. That could lead to even more experimentation as well. The days of “pot brownies” being the main source of edible cannabis may soon be an anachronism.
“Demand is there for cannabis and it is ever increasing,” said Sturges Karban, CEO of ManifestSeven, a cannabis supply chain and logistics firm.
“There are new adopters coming on line and a lot of product innovation that you had never seen in the black market,” Karban added, noting that things like cannabis-infused butter are now becoming increasingly popular.
Karban said there is still plenty of room for innovation in the industry because there is no dominant, national brand name in cannabis or CBD. He quipped that there is no Hershey of the marijuana market yet. In other words, the market is still too young to be worried about saturation.
ETF Managers Group’s Wilson agreed that “sales growth should remain strong for the foreseeable future as more states legalize, and as more ‘canna-curious’ consumers enter the market in states that are currently legal.” The fund owns cannabis pure plays like Canopy and Aphria.
Meb Faber, the CEO and chief investment officer of Cambria, said in an interview with CNN Business that cannabis in 2021 could be as lucrative as tobacco and alcohol companies were in the early days of those industries.
“Appeal to a human’s desire for recreation and you can wind up with strong businesses,” Faber said.