The Event That Will Help Marijuana Stocks Skyrocket
Marijuana Business, Stocks, Finance, & Investing November 27, 2019 MJ Shareholders 0
Marijuana Stock Growth: 100%+ Gains in 2020
Now that Canada has legalized recreational marijuana, many expected that shares would continue to grow indefinitely. But that was always delusional thinking; there were bound to be ups and downs. What isn’t delusional, however, is the belief that marijuana stocks are on a steady path towards growth in the future. And their current bargain prices are going to see gains as high as 100% in the coming year.
There’s one simple reason for that: the Canadian market is maturing.
The Pot Market in Ontario: Huge Future Sales Potential
When the marijuana roll-out came to Canada, it was by no means smooth. In some cases, there wasn’t enough marijuana available for sale, leading to stores being unable to meet demand. Another issue was that cumbersome regulations and burdensome taxation meant that legal pot prices were very expensive compared to illicit sales.
The roll-out has improved in some provinces, but in others it continues to lag. There’s no other more obvious example of this than Ontario. The richest and most populous province in Canada had a number of things going against it when legalization came to town.
First, it had a transition of governments. The Liberal Party held power right up until the summer preceding legalization (October 2018) and had planned to operate marijuana storefronts as a government-run monopoly. The Conservative Party took power and quickly shifted gears, allowing private-owned storefronts to open . . . but due to the timing, only a handful were operational come legalization.
To this day, Ontario still only has about 25 licensed storefronts operational across the province, with a promised 50 more on the way. That is still far below what would be necessary to satisfy the roughly 15 million inhabitants. The lack of access means that the marijuana black market is continuing to thrive, so a good portion of the market’s potential is being siphoned off by illicit dealers.
Now, Ontario is hardly the only place that has had difficulty with its marijuana legalization roll-out. Nevada, for instance, had to institute a state of emergency in order to bypass marijuana transportation regulations to keep deliveries going.
But, in any case, Ontario has only scratched the surface of what it could deliver in terms of sales as time moves forward.
Billions of dollars are being captured by the black market. As the government of Ontario permits more stores to open and as edibles and other marijuana products begin to reach the market (as they have now), we’ll likely see marijuana revenue soar. As revenue soars, expect to see share prices equally rise.
Oklahoma: A Model for Marijuana Legalization Roll-Out
A good counter-example to Ontario is Oklahoma. In less than a year, the Oklahoma medical marijuana industry has gone from having $0.00 in medical marijuana sales to becoming one of the most valuable cannabis markets in the entire U.S. (Source: “Chart: Oklahoma medical marijuana sales far exceed expectations,” Marijuana Business Daily, November 19, 2019.)
Much of that success is due to a marijuana-friendly government. The Oklahoma Tax Commission produced receipts showing that sales of medical marijuana in the state hit $258.0 million through the first 10 months of 2019.
And they are likely to eclipse $350.0 million by 2020—going far higher than most analysts’ expectations.
More than five percent of Oklahoma’s entire population is now registered to use medical cannabis, far exceeding any other program in the U.S. Couple that with the fact that Oklahoma also doesn’t limit the number of licensed marijuana businesses it permits, and you have a perfect template for how to successfully handle a marijuana roll-out.
Ontario is far larger and richer than Oklahoma and has recreational weed legalized. If it were to adopt a similar approach to that state, it would see marijuana stocks soar as revenue rose. That’s because marijuana prices would fall, hurting the black market, while more storefronts would open, making it easier and cheaper to buy legal pot.
Ontario has roughly four times the population of Oklahoma but despite that disparity, the state has issued licenses for 2,168 dispensaries, 1,415 processors, and 4,931 growers.
We don’t know how many of those businesses are up and running, but if even 2.5% of these licenses result in open-for-business dispensaries, this would far outnumber the 25 storefronts currently in operation in Ontario.
Oklahoma alone is expecting to generate a marijuana market worth $700.0 million annually. Ontario has four times the population and permits far more marijuana products. That means that literally billions of dollars are at play in the province and are going to come into play as the black market weakens.
Again, one is medical marijuana and one is recreational pot, but the comparison is apt: if government gets out of the way, the marijuana market (and marijuana stocks as a result) will thrive in Ontario, and the whole of Canada.
Oklahoma has also shown the rest of the U.S. how to legalize marijuana in a way that allows marijuana stocks to succeed. They don’t need government handouts; all they need is for the government to get out of the way and allow them to operate their businesses on an even playing field. With the black market as powerful as it is, this even playing field does not exist at the moment.
If the entire U.S., when it does legalize marijuana federally, takes as liberal an approach as Oklahoma, then the future is indeed shining for marijuana stocks.
The marijuana industry is growing by the day. As Canada and other legal marijuana markets continue to figure things out, expect to see revenues steadily climb while pot stocks grow from their current bargain prices.
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