The change of power in the White House provides a tailwind. US cannabis legalization seems only a matter of time. Something is happening in Europe too. Brave investors get into position.
Cannabis: Change of Power in the US Gives Rise to Hope – Brave Investors Position Themselves
In the United States marijuana use has been legal in the most populous state of California, as well as Michigan, Nevada, Maine, Massachusetts, and Vermont since 2018. This means that cannabis can now be consumed without penalty in eleven US states with a total of over 60 million inhabitants. It is estimated that more US states will soon release everyday consumption after Democrat Joe Biden won the US election. In a total of 33 states, consumption for medical purposes at least is already permitted.
Marijuana: Will it Become Legal at the US Federal Level Soon?
The vote to decriminalize marijuana produced a clear result. With Arizona, New Jersey, Montana and South Dakota, four states voted for a complete legalization of marijuana. In Mississippi and South Dakota, the use of cannabis for medicinal purposes has been approved.
A survey by the American polling institute Pew Research showed increasing cross-party support for legalization efforts in the cannabis industry last year: 78 percent of the Democrats surveyed and 55 percent of the Republicans voted in favor of decriminalizing the drug. Consent is even clearer among US citizens. Two thirds of all Americans are in favor of a complete release, 91 percent is at least for its use for medical purposes. That is more than the proportion of those US citizens who support the right to abortion or who consider climate change to be (largely) man-made.
Despite the recent momentum, a nationwide release of cannabis is still not a sure-fire success. The future Vice President Kamala Harris has promised that the Democrats will work for decriminalization at the national level, but approval in the US Senate seems questionable despite the survey results.
The wave of cannabis legalization is also spreading internationally. The European Court of Justice (ECJ) recently ruled that the cannabinoid (CBD) obtained from the female cannabis plant should not be classified as an addictive substance. Among other things, CBD is considered anti-inflammatory and works against cramps. Industry experts outline strong growth potential for the sector in the coming years.
According to an evaluation by New Frontier Data, the sales potential of the industry will increase by nine to around 31 billion US dollars by the year 2025, simply because of the recent double approval in the four US states. And it shouldn’t stop there. After legalization in New Jersey, New York and Pennsylvania will also consider carefully whether to leave the expected tax revenues to their neighbors. Corresponding bills are already being drawn up in Texas.
Best Players in the Market
Advances at the political level have recently seen the share prices of cannabis companies jump on a broad front after they came under the wheels in the Corona crash in March. The shares of the Canadian companies Canopy Growth and Aphria, recommended a lot to investors, slid below the stop prices.
In the short term, US providers with an established sales structure appear more attractive. For example, Columbia Care already sells its products in 13 US jurisdictions, including liberal states such as California and Colorado, but also New Jersey and Arizona, which only launched the full release of marijuana in the recent election. This means that society reaches almost half of the US population. For the coming year, in addition to doubling sales, the leap into the profit zone is on the agenda.
Ayr Strategies is one of the relatively young players in the sector. The company was previously represented in Massachusetts and Nevada and has now entered the Pennsylvania market with the takeover of DocHouse. After the expected doubling of sales in the current financial year, analysts expect the company to grow strongly and achieve profitability in 2021.
US Cannabis Stocks Growth Potential
In a long run, the American market promises a good growth potential. There alone, the volume for medical marijuana experts is expected to increase from 10 to 11 bln USD in 2018 and in 2021 to 40 bln USD. In general, comprising recreational usage, analysts assess that the US cannabis industry could swell from 11 bln USD in 2018 to 75 bln USD by 2030 in the best-case scenario.
Support of Population
Based on a nationwide survey that the Gallup Institute carried out, more than 68% of US residents surveyed were in favor of legalizing cannabis in the US at the end of 2020 – more than ever before. In the first survey year, 1969, only 12% of the US people were in favor of cannabis approval. Relying on Quinnipiac University survey, 9 out of 10 respondents voted for medical approval.
Conclusion: Consolidation in the Cannabis Market Continues
The cannabis market is developing as expected: After the gold rush mood and the boom, the wheat is being separated from the chaff in the industry and all companies are in a restructuring phase. Expect the marijuana industry to continue to experience very volatile price developments. If you want to make such a highly speculative investment, you should make sure that the company has sufficient financial cushion to offset the expected losses until it breaks even. After the increases as a result of the Biden election victory, a correction should be awaited for new entrants.