Pump the Brakes! Canada Delays Recreational Sales, What Does That Mean for Marijuana Stocks?


For the past several months, many observers have been excited about Canada’s plans to legalize recreational marijuana across the country, sparking interest in marijuana stocks. Investors are certainly among the individuals watching this develop, looking for marijuana stocks in Canada to snap up.

During the past couple of years, the legal marijuana market has grown at a significant pace. In fact, few industries have grown at a more robust pace than that of legal pot, motivating people to look for marijuana stocks to buy, but also causing concern over a potential marijuana stock bubble.

The Canadian market is experiencing issues, even though its future looks bright.

Canadian provinces have stated that they will “need 8 to 12 weeks following (adoption of the law) for preparatory activities to occur, such as preparatory movement of products from licensed producers to distribution and retail outlets.” A potential two- to three-month delay has troubled many individuals invested in marijuana stocks in Canada.

Some companies, like Aurora Cannabis (NASDAQOTH:ACBFF), have ramped up production in anticipation of the universal legalization of recreational marijuana in Canada. Investors in marijuana stocks are hopeful that this will be the only delay in the legalization of recreational marijuana in Canada, and that companies will be able to bounce back from any potential issues.

The Canadian market is not the only one in North America to consider, the American legal weed market also seems to have a bright future.

Cannabis research firm ArcView has been making projections, even calling for an impressive annualized growth rate of 26% for the North American pot industry between 2016 and 2021. Marijuana Business Daily‘s 2017 report “Marijuana Business Factbook 2017” forecasts 45% legal weed sales growth in the US in 2018 alone.

It also predicts an aggregate quadrupling in legal pot sales between the years 2016 and 2021 to approximately US$17 billion. This data points to the fact that this is a great time to buy marijuana stocks.

If you’re looking for marijuana stocks to buy, other factors make this a good investment idea.

In addition to legal pot’s rapid sales growth, the public has significantly changed its mind regarding marijuana. Back in 1995, the year before California became the first state to legalize medicinal cannabis, according to a Gallup poll, only 25% of Americans supported the idea of making weed legal for adult use. However, over the past 23 years, attitudes have changed.

In October 2017, a little under two-thirds of respondents to a similar poll favored the idea of full legalization.

This number represents an all-time high for Gallup’s nearly five-decade-old survey regarding this topic. Increased public support for legal marijuana use means increased chances that legislation will make the drug legal for adult consumption; this, of course, means that marijuana stocks in the USA might be a good investment.

Growing sales, rapidly shifting support among the general population in favor of legalization, and even medical studies demonstrating marijuana’s uses have helped light a fire under investors interested in marijuana stocks–and we are not just blowing smoke. Over the trailing year, a majority of the largest weed stocks–those with market caps in excess of $200 million–have doubled, or even tripled, in value. This would have been difficult to imagine even ten years ago.

Marijuana is legal in various places round the globe, and each marijuana market is different.

The United States might be world’s the most lucrative market for marijuana, and legal marijuana has growing support from the American public. However, Congress’ actions have made it extremely difficult for legal weed businesses to thrive in America. Cannabis remains a Schedule I substance, meaning that the Drug Enforcement Agency had deemed it prone to abuse and without recognized medical benefits. Other Schedule I drugs include LSD and heroin.

This complicates matters for individuals looking to invest in marijuana stocks in the USA.

This classification by the DEA disadvantages businesses who operate in the 29 states that have legalized marijuana. Marijuana companies operating in the US have minimal access to basic financial services, including lines of credit and checking accounts. Additionally, these companies are also unable to take normal corporate income-tax deductions, thanks to U.S. tax code 280E. Assuming that American weed companies are profitable, they could be subject to an effective tax rate of 70% to 90%.


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