Cannabis Stocks: When the Next Big Wave Comes

By Michael Sassano

Multi-State Operators (MSOs) in the United States are poised for the next major stock escalation, which could see at least a 50% move as early as late August without federal legislative moves. With volumes picking up in July, US equities don’t need a special event to cushion this recent correction.

Cannabis is a constant performer

Cannabis is fast closing the revenue gap, outperforming such pioneering institutions as the National Football League – and there is still an estimated $ 66 billion legacy US market to replace. Even more convincing is the increasing profitability that has started after the massive infrastructure spending in 2018 and 2019. While the summers offered ever lower volumes of movement for small caps, the trading indices showed favorable valuations until the end of the season. despite the expected federal legal collapse on the horizon.

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Even without federal legislation like the SAFE Banking Act, US cannabis revenues rose astronomically from $ 1.9 billion in 2014 to $ 17.5 billion in 2020, again beating expectations. Forbes recently predicted that the U.S. market will reach $ 43 billion by 2025 – which was forecast at $ 29 billion just a few months ago. A spate of newly legalized states (and more to come) almost ensures we’ll see another stellar year in 2021 and an even bigger surge in 2022. And as more demographics like seniors open up to cannabis therapies, the industry is growing more resilient with legalization sweeping through the remaining hold-out states.

Cannabis is driving the U.S. marijuana index up

Compare the above sales growth and growth projections with the US Marijuana Index and you will see a typical over-optimistic year. The index started in January 2015 and traded at 115, which is above today’s level of around 110. By February 2016, that index had dropped to 23, where the second sharpest drop hit its bottom in March 2020. In that period from February 2016 to March 2020, we saw two highs of 101 in late October 2016 and another high of 134 in April 2019, followed by a record high of 145 in February 2021. The next run will be the cap set this year 145 crack and surpass.

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The quality of companies operating today – plus the solid foundation of a guaranteed, enduring US cannabis market – is dramatically different from the 2015 landscape. Profitability has become a recurring theme in larger, more developed MSOs, while smaller companies have learned to be profitable by starving the capital markets with MSOs. Obviously, if the SAFE Banking Act or other measures are taken to stimulate cannabis companies, it will boost the financial environment, but it is not critical to making a new high in cannabis stocks this year. Cannabis sales will continue to rise, companies will continue to post record numbers and profits, and new states will legalize until federal regulations catch up with consumer preferences.

Statutory stagnation cannot and will not hinder the growth of the cannabis market

Mergers and acquisitions (M&A) and infrastructure development are at their highest levels to date. And despite Canada’s problems, the US and global capital markets are responding by stepping up their services to cannabis. The US is benefiting most from private equity financing because of its massive revenue streams, which are gaining momentum, but also because of improved company fundamentals. Avoiding construction, people forget about the profitability model that Canada’s state legalization brought with it, realizing that cannabis will stay here and is best invested in profitable operators. However, money and mergers and acquisitions go to all businesses large and small in the United States. Even Canadians are trying to buy their way into the US market and pick up the junk that US MSOs pass on. Expect M&A and infrastructure investments to only increase over the course of the year.

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Ideally, positive laws will be passed on Capitol Hill to work towards building the cannabis industry, but regardless of actions taken during this term, cannabis will continue to generate huge profits. The political turmoil becomes the mere background noise of the daily reality of a normal US cannabis user. 100.9 million U.S. residents already live in a recovery state, and 95% of the population lives in a state with licensed medicinal cannabis – so the consumer population is present and growing.

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In autumn we will see a return of the interrupted supply chains to full volume production on the market and should be prepared for the next warehouse run at the end of August. Already now, cannabis brokerage houses are urging brokers to take time out now and prepare for heavy activity in late August. The ratings you see today will no longer be around, and any surprisingly positive news from Washington DC will double stocks where they are today.

Author Biography: Michael Sassano, CEO of Somai Pharmaceuticals, a European company focused on the pharmaceutical extraction, manufacture and formulation of GMP certified pharmaceutical grade cannabinoid products across the European Union.

This article originally appeared on Benzinga and was republished with permission.