America’s legalized sales of Marijuana skyrocketed up to an estimated $9.2 billion in 2017, and growth is projected to earn an estimated $47.3 billion by 2027, according to ARCView. Financial experts predict the legal weed business will employ up to “half a million” employees over the next few years.
The rapid growth of the legal dope game is a major political, social and economic climate, creating one of the greatest opportunities of our lifetime, bringing forth wealth, jobs and tax money for states across the country.
According to SoLMM6, a company that provides graphs which show five-year forecast of spending in 31 U.S. cannabis markets including Canada and 21 other countries, “despite federal prohibition, the U.S. legal cannabis industry experienced a 31 percent growth beginning in 2017, raking in over $8.5 billion.”
This same report predicts revenues spent on legal marijuana in the U.S. may reach around $23.4 billion as early as 2022, thus growing at a 22 percent compound annual rate growth.
“The end of marijuana prohibition is in sight and what that means for this market cannot be overstated,” said Troy Dayton, CEO of ARCView group.
With ‘hundreds of millions’ of marijuana users in the nation and abroad, the industry is on the verge of a phenomenal money-making machine akin to a historic gold rush. But the market remains high risk because the federal government hasn’t yet legalized marijuana although many states have legalized the substance.
“California is on track to post a record $3.1 billion in licensed cannabis/marijuana sales this year alone, making the state the largest legal marijuana market in the U.S.,” according to financial analysts.
Legal marijuana sales in the U.S. reached approximately $12.6 billion in 2018, the latest figures available, Real Money Magazine reported.
This multi-billion-dollar industry is booming for all the right reasons: hemp companies are steadily gaining popularity, and since more states allow legal Marijuana, there is an exponential number of Marijuana companies traded on the Canadian exchanges.
As the legal Marijuana industry continues to gain steam, chugging up the financial tracks, mainstream companies are leaping into the frying pan to reap big profits.
Despite this burgeoning money-making market, there are companies still reluctant to hop on the bandwagon due to the unrelenting stigma associated with marijuana use.
The information in this article aims to educate potential investors who may consider squeezing into the legal weed action. It shows investors how to analyze the differences to leverage effective investment strategies to make a competent choice whether to invest in the Medical Marijuana or Recreational Marijuana industry. And, further, how taxes, and the stock market affects each one. These, in turn, will help investors make wiser decisions before taking a quantum leap to invest in the weed business.
The legal weed industry consists primarily of two distinct markets:
(1) Medical Marijuana
(2) Recreational Marijuana
Both, though, have a reference model that supplies different markets. Medical Marijuana stocks represent companies focused on research and development to create products to treat targeted illnesses, while Recreational Cannabis companies produce products unrelated to health issues. Recreational users engage in using cannabis to achieve a ‘feel-good’ high from purchased products. This involves smoking, consuming products, or sipping different forms of cannabis drinks.
To assess an investor’s risk profile, stocks for both types of cannabis companies (medical or recreational) are very ‘hot’ at the moment. That’s because the weed business represents a tremendous growth opportunity, similar to the big opportunities with technology investment stocks.
Recreational Marijuana Stocks
Although Colorado became the first state to legalize Medical Marijuana, the legalization concept contributed to an outgrowth of Medical Dispensaries while Recreational Marijuana expanded into a larger audience. By all means, the recreational marijuana industry mostly uses THC (tetrahydrocannabinol). THC is a psychoactive substance responsible for the accelerated high that results from smoking marijuana. THC products can also include marijuana-infused beer, coffee, and cigarettes. Thus, since recreational marijuana doesn’t have a medical purpose, this particular industry sells the type of marijuana that users crave the most.
ArcView Market Research and BDS Analytics estimated 67 percent of global cannabis spending would be spent in the recreational industry, which, in turn, attracts major investors.
Investors must also realize unless the Federal Government officially legalizes recreational marijuana, the market itself may not reach its greatest potential. Then, too, the market may surpass potential setbacks due to federal prohibition. Another pitfall in the cannabis investment game is the fact that Recreational Marijuana products carry heavy taxes, more taxes than Medical weed. For example, Colorado charges a 15 percent excise tax for sales by cultivators and retailers, in addition to an extra 15 percent sales tax. These taxes make marijuana products significantly expensive. Adding to tax woes, companies that sell recreational marijuana products must account for considerable regulatory government charges on their balance sheets.
Similar to Medical Marijuana, other stocks and investments are available in the Recreational Cannabis industry. A major player in Recreational Marijuana is a Canadian company called Canopy Growth(CGC). According to market stats, stock prices closed at $44.64 on May 28, 2019, with a market cap of $14.84 billion. Canopy growth reported total annual revenue of $77.9 million in 2018, compared to $39.9 million from the previous year.
Medical Marijuana Stocks
Medical Marijuana/Cannabis is prescribed to patients for various health conditions and symptoms by physicians. To legally use medical marijuana to alleviate pain or specific health ailments, a person needs a prescription to receive Medical Marijuana treatment. Medical Marijuana has been used to treat seizures, pain, cancer, nausea, and even mental health conditions. Marijuana-based medicine has added to substantial applications in government healthcare.
For example, a 2016 research paper written by Ashley Bradford and W. David Bradford at the University of Georgia reported how prescribed sales for painkillers, “fell significantly” in states with legalized Medical Marijuana.
“National overall reductions in Medicare programs and enrollee spending when states implemented Medical Marijuana laws were estimated at $165.2 million per year in 2013,” the authors wrote.
Despite Medical Marijuana legalization in 31 states, including Recreational Marijuana legalization in 11 states (as of July 2019) … there are federal government restrictions leveled against the drug.
On a better note, the Food and Drug Administration(FDA) has so far approved four chemical-based drugs similar to the chemicals found in the cannabis plant. They include Epidiolex, a much sought-after drug used to treat a rare and severe form of epilepsy in children. Medical benefits derived from the use of Epidiolex medication are invaluable for users suffering from terrible seizures, but the federal government still hasn’t legalized Medical Marijuana because marijuana is still classified by DEA as a controlled substance.
Top level Patent Holder
Illegal classification aside, the Medical Marijuana industry continues to bloom. Research in 2018 showed that Sanofis Aventis (SNA) and Merck (MRK) are among the top-level cannabis-related patent holders. Big name Medical Marijuana companies are: GW Pharmaceuticals (GWPH), Tilray(TlRY), Corbush PharmaceuticalsCRBP), Cara Therapeutics(CARA), and Zynerba Pharmaceuticans (Zyne).
Arcview Market Research and BDS Analytics predict that money spent on legal cannabis will grow 230 percent worldwide from $9.5 billion in 2017 to $31.3 billion in 2022, with 33 percent expected to go into the Medical Marijuana industry. A majority of estimated revenues will be spent in the U.S.
To make the point clearer, earlier this year, GW Pharmaceuticals spent 19 years researching cannabis chemicals, prior to submitting its first content for drug approval. For stock members interested in investing in cannabis, the foray into the market isn’t difficult. All that is needed is money and a very good strategy. Cannabis market experts suggest investors should consider purchasing stock in companies already engaged in continuous research or investing in companies with Medical Marijuana already on the market. Investors can find these investment companies at the Toronto Stock Exchange(TSX). Other companies are often traded over-the-counter(OTC).
Additional options available for use for marijuana investors are sources like the exchange-traded fund (ETF). An ETF trades exactly like stocks, but ETFs are mostly used to combine stocks asset, bonds, or commodities. ETF Alternative Harvest includes companies like GW Pharmaceuticals and the company Tilray traded at $33.23 as of May 28, 2019.
So, how can this information benefit investors to make carefully strategic investment decisions in the legal marijuana/cannabis business?
Experts give this sound advice: the same technique investors use to evaluate Medical Marijuana stocks is the same model frequently used for pharmaceutical startups. Investors should zero in on a company’s flow of drugs and spending on research. Since cannabis research is fairly new and still ongoing, those in the weed business can only speculate that investors financial dividends in the Medical Marijuana market will sustain longer when compared to Recreational Marijuana.
Editor’s Note: In addition to covering Medical Marijuana and Marijuana investment topics, Here are previous articles that Newsblaze Reporter Clarence Walker has written about the Medical Marijuana Industry:(1) https://stopthedrugwar.org/chronicle/2013/may/16/irs_war_medical_marijuana_provid#comments.
Reporter & Journalist Clarence Walker has written extensively about marijuana/ narcotics topics for The Fix, Drug War Chronicles, Drug Policy, Global Research, including Alternet News. He can be reached at:[email protected]