Publicly listed cannabis providers continue to see their valuations driven down. It is a mixture of aggressive quick-promoting and adverse investor sentiment from the relentlessly pessimistic (and grossly inaccurate) coverage of the mainstream media.
Back in the genuine globe, the cannabis sector is demonstrating development prospective that would be the envy of most other industries. As we have accomplished regularly, The Seed Investor points to Colorado.
It has accomplished this by undertaking a superior job in regulating its legal cannabis sector. Far more particularly, it has resisted the temptation of most states (and most Canadian provinces) to more than-regulate its legal cannabis sector.
Beyond this, the numbers speak for themselves. The Seed Investor has just reported that Colorado has set yet another month-to-month record in sales revenues for its legal cannabis sector.
- August’s sales record was the 3rd consecutive month-to-month record, and 4th in the final five months
- The new record represented a four% achieve in month-more than-month sales
- At the August price of cannabis sales, Colorado’s legal cannabis sector is now a $two billion per year sector
Provided the trend in sales, $two billion in legal cannabis revenues more than the subsequent 12 months appears extremely conservative. This is exceptional.
It wasn’t till 2016 that Colorado’s annual cannabis revenues initial exceeded $1 billion. Revenues can be anticipated to best $two billion in 2020, barring a sharp reversal of the present trend.
In additional basic terms, what this says to the legal cannabis sector (and cannabis investors) is that this is a sector that has no ceiling in terms of customer sales, more than any quick- or medium-term horizon. Contrast this with a projection for Colorado’s legal cannabis sector from business enterprise info leader, Statista.
In an estimate for 2016 – 2025, Statista saw Colorado’s cannabis revenues going from $1.34 billion in 2016 to $1.94 billion by 2025 (a great deal also low). In distinct, Statista predicted that Colorado’s cannabis revenues would commence leveling off by 2018 and attain a plateau.
Ironically, Colorado’s cannabis revenues did level off in 2018, increasing only from $1.51 billion to $1.55 billion. It is the only year due to the fact Colorado completely legalized cannabis in 2014 that annual revenues haven’t risen by at least 15%.
In 2019, legal sales are after once again on pace to show 15+% annual development.
As The Seed Investor has pointed out in a preceding post, if cannabis was currently complete legal across the U.S. (and adequately regulated like in Colorado), this would be a $108 billion sector in the United States currently.
In Canada, the province of Alberta seems to be following in the footsteps of Colorado. The province is Canada’s clear (per capita) sales leader, and it has currently opened up more than 270 cannabis retail places in much less than 1 year of complete legalization.
Regardless of the delays in a number of Canadian provinces to open retail cannabis retailers for shoppers, Canada’s cannabis sector is also demonstrating robust sales development, with a double-digit improve in sales reported once again for the month of July.
All round, Canada’s legal cannabis sector is on track to additional than triple in size in the initial complete year of legalization. Myopic and backward-seeking ‘analysis’ from the mainstream media on cannabis providers and the cannabis sector just ignores these fundamentals.
This sets up the sector for a sharp reversal (larger) in marijuana stock valuations as growing revenues collide with falling share costs. We’ve observed no reversal however.
Having said that, seasoned investors know that markets can stay “irrational” for extended periods. This is specifically accurate when investors have difficulty in acquiring trustworthy info on distinct providers, or a distinct sector.
Massive Media continues to obsess about the much less than .002% of U.S. cannabis shoppers who have seasoned wellness challenges from poorly regulated vapes in the United States. But it practically ignores the .13% of Americans who die from tobacco use each year.
For investors who tire of this Trivial Pursuit, invest additional time seeking at the details from Colorado’s dynamic cannabis sector. And invest much less time on the vacuous, anti-cannabis Fake News from the mainstream media.