The Dramatic Rise and Fall of Cannabis Company Stocks
The unprecedented expansion of cannabis across North America took the investment world by storm, as investors raced to cash in on the “green rush”.
Yet, even as changing regulations unlock new opportunities, it seems as though the cannabis stock bubble has already burst — at least temporarily.
Today’s visualization dives into the roller coaster of cannabis company stock valuations over the past few years, and which companies remain standing in this hazy market.
A Wild Ride for Cannabis Stocks
The North American Marijuana Index tracks the equally-weighted stocks of leading companies operating in the legal cannabis industry in U.S. and Canada. Companies listed on the index must have at least 50% of their business strategy focused on the legal industry, including ancillary operations that support companies and consumers.
At the tail-end of 2017, the promise of upcoming legalization in two immense markets—California state and Canada—had investors all fired up. The index’s low (105.31 on June 27th, 2017) shot up almost three times to 358.93 by January 8th, 2018.
Things took a sharp turn in the second quarter of 2019, as the expectations for cannabis company stocks encountered a harsh reality post-legalization.
|Index||North America||🇺🇸 U.S.||🇨🇦 Canada|
Note: 52-week period data captures Dec 9th 2018-Dec 9th 2019.
What are the reasons behind such a nosedive? Could the cannabis industry still make a comeback in 2020? We look at some opposing perspectives to answer these questions.
So Much For the Green Rush
The cannabis industry is experiencing significant challenges. In the U.S., legal cannabis faces high taxes—come the new year, consumers in California will see an 80% mark-up on their cannabis at checkout, up from 60%.
North of the border, federal legalization led to immense consumer demand for Canadian cannabis—but supply can’t keep up. To make matters worse, retail stores are slow to roll out, which means Canada is feeling the crunch.
Steep prices, and difficulty purchasing products post-legalization, allow the black market to thrive. It’s clear many cannabis companies have taken a big hit as a result.
According to the Marijuana Index, here are the 10 biggest companies in the space now:
|Company||Symbol||Market Cap (US$)||Country|
|Canopy Growth Corp.||NYSE: CGC||$5.6B||🇨🇦 Canada|
|Curaleaf Holdings||CNSX: CURA||$3.67B||🇺🇸 United States|
|GW Pharmaceuticals PLC||NASDAQ: GWPH||$2.98B||🇬🇧 United Kingdom|
|Aurora Cannabis Inc.||TSE: ACB||$2.85B||🇨🇦 Canada|
|Green Thumb Industries Inc.||CNSX: GTII||$2.42B||🇺🇸 United States|
|Cronos Group inc.||TSE: CRON||$1.83B||🇨🇦 Canada|
|Trulieve Cannabis Corp||CNSX: TRUL||$1.91B||🇺🇸 United States|
|Tilray Inc.||NASDAQ: TLRY||$1.46B||🇨🇦 Canada|
|Aphria Inc.||TSE: APHA||$0.96B||🇨🇦 Canada|
|Harvest Health & Recreation Inc.||CNSX: HARV||$0.94B||🇺🇸 United States|
Note: Companies listed on a Canadian index have had their market cap converted from CAD$ to US$. Top 10 companies are based on those listed on the North American Marijuana Index. All values as of Dec 9th, 2019.
Only one company outside of North America—and even the cannabis sector—lands on this list. The UK-based Big Pharma company GW Pharmaceuticals is steadily growing its industry presence, as it currently holds 41 cannabis patents in the U.S. and Canada combined.
Still, even these big players have seen their valuations drop since the industry was at its peak. Unless the aforementioned issues are ironed out, investors may continue to pull their dollars from the cannabis industry.
A psychological shift has taken place from everyone wanting to own (cannabis) to everyone involved now feeling burned. I think many investors are now over it.
—Chris Kerlow, portfolio manager at Richardson GMP
On the flip side, some investors aren’t calling it quits quite yet.
Long-Term Prospects Are High
While cannabis seems plagued with issues, some argue that these are simply short-term growing pains and will be solved as the industry matures.
Particularly in the U.S., experts predict that cannabis sales could reach immense heights in the next decade:
- $30 billion by 2025 (New Frontier Data)
- $50 billion by 2029 (Jefferies Group LLC)
- $75 billion by 2030 (Cowen Inc.)
- $100 billion by 2029 (Stifel Financial Corp)
Compared to a benchmark of $13.6 billion today, these numbers may seem ambitious—but they’re backed by major industry trends. 2020 could well be the year the market stabilizes, as consumers explore an array of retail options and vote with their wallets.
What’s more, key players in consumer industries—from alcohol and tobacco to beauty and fitness—are making big bets in cannabis and CBD-infused products. A higher number of partnerships could spark the next uptick for the industry’s potential.
The marijuana business is not for the faint of heart. But this is a big long-term game.
——Mark Zekulin, CEO of Canopy Growth Corp.
An Eye on What’s to Come
It’s clear there are differing viewpoints on the future of cannabis companies and their respective investors. As this snapshot of cannabis stocks unfolds and transforms in 2020 and beyond, could companies potentially buck the current trend and bounce back? Or will stocks continue to go up in smoke?
9 Things Investors Should Know About the Cannabis Industry in 2021
This graphic provides an overview of 9 key developments in the cannabis industry that investors should be aware of going into 2021.
9 Things Cannabis Investors Should Know in 2021
Unlike dozens of other industries across the globe, cannabis experienced significant growth as a result of the COVID-19 pandemic.
In fact, with consumption for both medical and recreational products on the rise, 2020 was a record-breaking year for the industry. After years of investor uncertainty, analysts are predicting a continued bull market in 2021, with several new and exciting developments on the horizon.
Here are nine things cannabis investors need to know.
1. Cannabis Stocks on the Rise
While asset prices took a dip during the initial stage of the COVID-19 outbreak in March, the cannabis sector recovered swiftly after reporting impressive numbers.
Even though cannabis investors have experienced some ups and downs in the last several years, 2021 looks more hopeful.
2. COVID-19 and Cannabis
Cannabis has become an attractive option for people spending more time at home, both as a means of entertainment, and to reduce stress and anxiety associated with the pandemic.
As a result, cannabis sales are soaring. In Canada, monthly sales reached an all-time high of $270 million (CAD) in October 2020, a dramatic increase from $180 million just six months earlier.
3. Cannabis Black Market No More?
For millions of U.S. citizens who live in states where the sale of cannabis is still restricted, the illicit market continues to be their only option.
But with loosening restrictions and legal cannabis becoming more widely available, legal sales are predicted to reach $50 billion by 2026 while illegal sales will plummet to less than $1 billion by the same year.
|Year||U.S. Legal Cannabis Sales||U.S. Illegal Cannabis Sales|
|2016||$6 billion||$25 billion|
|2026||$50 billion||<$1 billion|
4. Political Change Driving Market Growth
Almost 70% of Americans now support the full legalization of cannabis—the highest figure ever recorded.
States where cannabis is legal are now paving the way for cannabis sales, with California expected to pull in over $6 billion by 2021 alone. If federal legalization comes to fruition over the next several years, the already booming U.S. market could see further growth.
5. All Eyes on the European Cannabis Market
The European cannabis market has been on investors’ radar for several years, and with good reason—it is one of the largest cannabis markets in the world.
Driven primarily by medicinal products, the market will be valued at over $39 billion by 2024, with countries like Germany—Europe’s largest economy—leading the way.
In late 2020, the market experienced its biggest breakthrough yet, with the European Union ruling that products containing CBD (one of the most active ingredients in cannabis) are no longer listed as narcotics.
6. Making History in Mexico
Mexico is another market that is piquing the interest of investors and cannabis companies the world over. That’s because it could soon be the third country in the world to legalize recreational cannabis by court order.
With a total addressable market of $2 billion and the potential to support up to 75,000 jobs, these new regulations could change the dynamic of the global market for the better.
7. Most Popular Cannabis Products
Given the flurry of product innovation in the market, consumption of cannabis is quickly changing.
Relatively new products such as edibles and oils are gaining traction, while consumption of flower appears to be declining. This could be due in part to oral products being perceived as a healthier alternative to smoking.
8. CBD Products are Moving into the Mainstream
Although CBD was once considered a niche product that could only be found in dispensaries, growing awareness of the benefits and safety of these products are causing companies operating in the consumer packaged goods industry to take notice.
The cannabis compound is a new addition to a wide range of products such as skincare, makeup, and supplements that can now be purchased almost anywhere—from ecommerce sites to local grocery stores.
9. The New Cannabinoids on the Block
Beyond CBD, scientists have discovered over 100 rare, or minor cannabinoids such as CBG and CBN, that could have even more significant benefits than their major cannabinoid counterparts.
For example, preliminary research shows that CBG could inhibit cancer growth, help treat glaucoma, bladder dysfunction, and kill drug-resistant bacteria.
These discoveries are not only attracting huge attention from the cannabis industry, but from the pharmaceutical industry as well.
Milestones in the Making
With all of these exciting developments coming to the fore, it’s safe to say 2021 could be one of the cannabis industry’s most transformative years to date.
Mapped: The European CBD Landscape in 2020
This graphic explains the innately complex legal status of CBD products in Europe and highlights the countries leading the CBD charge.
Mapped: The European CBD Landscape in 2020
To say CBD has risen in popularity over the last decade is an understatement.
Not only have CBD consumer products rapidly infiltrated a long list of industries, new research discoveries continue to prove their therapeutic benefits. By 2023, the European CBD market is estimated to reach €1.4 billion.
However, a big problem remains—there is an incredible amount of uncertainty surrounding what is legal, and what isn’t. The above infographic from Elements of Green sheds some light on the innately complex legal status of CBD products in Europe.
The Great CBD Debate
CBD—short for cannabidiol—is a non-psychotropic compound produced by cannabis plants.
While most European countries have legalised it in some way, the caveat for many is that it must be extracted from industrial hemp, thus containing less than 0.2% THC—the intoxicating compound also found in cannabis. On the other hand, countries such as France and Norway only permit CBD isolate (the pure form of CBD) with no THC.
In 2019, the European Food Safety Authority (EFSA) designated CBD products as a novel food. This means that companies should seek authorisation to bring products to market, although it is not required by law.
However, the industry has now hit a fork in the road, as the European Commission (EC) recently announced it will be suspending applications for novel foods status while it determines whether or not certain CBD products should be labelled as narcotics instead.
The Legal Landscape in 2020
As the industry flip flops between regulations, consumers and investors need to understand that each country has its own laws surrounding the use of CBD.
|Country||CBD Legal Staus|
|🇦🇹 Austria||Legal grey area (legal lean)|
|🇧🇦 Bosnia and Herzegovina||Illegal|
|🇧🇪 Belgium||Legal grey area (restricted lean)|
|🇨🇿 Czech Republic||Legal grey area (legal lean)|
|🇭🇷 Croatia||Legal grey area (legal lean)|
|🇪🇪 Estonia||Legal grey area (legal lean)|
|🇫🇮 Finland||Legal grey area (restricted lean)|
|🇭🇺 Hungary||Legal grey area (legal lean)|
|🇮🇸 Iceland||Legal grey area (legal lean)|
|🇮🇪 Ireland||Legal grey area (restricted lean)|
|🇮🇹 Italy||Legal grey area (restricted lean/legal for medical use)|
|🇱🇻 Latvia||Legal grey area|
|🇱🇮Liechtenstein||Legal grey area|
|🇲🇹 Malta||Legal grey area/legal for medical use|
|🇲🇰 North Macedonia||Legal for medical use|
|🇳🇴 Norway||Legal for medical use|
|🇵🇹 Portugal||Legal for medical use|
|🇷🇸 Serbia||Legal grey area (restricted lean)|
|🇬🇧 United Kingdom||Unrestricted|
While a handful of European countries have made it illegal to import, buy, or possess CBD, the vast majority have legalised CBD products that either comply with the Novel Foods Act, or can be obtained from a licensed medical practitioner.
Of these countries, Germany and the UK lead the European CBD market, followed by Switzerland, Austria, Spain, and Greece.
A Call For Change
A progessive stance on cannabis legalisation combined with increasing consumer demand has led to several countries showing remarkable growth, such as Poland, Bulgaria, Netherlands, and Luxembourg.
Luxembourg in particular presents a compelling growth story, as it plans to fully legalise adult-use recreational cannabis in 2021, which would make it the first European country to do so.
Despite its small size, Luxembourg could in fact be instrumental in encouraging neighbouring countries to implement similar reforms, also known as the neighbour effect.
Growing Pains of a Nascent Industry
Considering each country has its own unique restrictions in place, CBD consumers should educate themselves on the regulations and laws relevant to them.
Despite these often confusing laws and restrictions, it is clear that demand for CBD products is growing exponentially. As a result, the continent may have the potential to overtake North America as the largest CBD market in the world.
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