In a matter of months, white-hot cannabis companies have flamed out in spectacular fashion. Many have lost two-thirds or more of their value.
It wasn’t that long ago that the cannabis industry was on fire. Big markets like Canada and California had legalized recreational use, while populous states such as New York and New Jersey were expected to follow suit. This had executives and analysts forecasting sales in the tens of billions of dollars within a few years, sending stocks to valuations that even some in the industry warned were too high.
Despite the obstacles, many remain optimistic that bullish benchmarks will be reached, though later than expected. Cowen Inc. analyst Vivien Azer recently boosted her U.S. sales outlook to $85 billion by 2030 from a previous forecast of $80 billion, while Canopy has said it’s still on track to turn a profit in three to five years.
What would get share buyers’ attention, Ort said, is legislative easing in the U.S., including passage of a proposed bill that would pave the way for financial institutions to do business with cannabis companies and bring large institutional investors and U.S. capital markets into the fold.But cannabis remains federally illegal in the U.S., meaning that shares are largely held by retail investors, who are less likely than institutional investors to remain patient in a downturn.
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