That millions are still vying for shares in legal weed stocks should be of comfort to the marijuana stock investors who have been taking a beating on the market. The cannabis industry has been going through a major adjustment period that began in the middle of last month and is still in process.
The panic in some shareholders has been real, but, the reactive question of whether to continue or pull out their pot stocks investment is short-sighted.
Wise investors must closely follow industry trends. The two major players, Aurora Cannabis Inc. (stocks down by 4.5% in a single day) and Canopy Growth Corp. (stocks down by 3.5% in a single day) are both showing vulnerabilities, this is true. It is also true that other major MMJ stocks have taken huge hits since mid January, some by as much as 30%, instigating the question: “Is this the end of the marijuana industry as we know it?”
To which analysts offer a resounding “No.”
The long term forecasts of Aurora Cannabis and Canopy Growth as companies are still promising, as is the overall forecast of cannabis stocks.
Stephen Karmazyn, an editor of Profit Confidential said,”What the industry is experiencing is a correction after these companies shot through the stratosphere in late 2017, gaining hundreds of percentage points in value in a few short months. The market was in need of a correction and that correction hit in January 2018.”
A harder question to answer is whether or not the pot stocks of these companies were overvalued.
According to Karmazyn, a full examination of this question may not be realistic until after Canada’s legalization of recreational weed this year. Also, giving more countries time to find their traction within the industry will offer clearer insights.
Investors in many of the large-cap cannabis stocks knew little but stagnation last year, until the final months heading into 2018.
But, those who hung onto their stocks reaped great rewards when the price of weed exploded in value. Karmazyn believes a similar pattern will play out again this year. Aurora Cannabis and Canopy Growth’s pot stock values may continue to falter for awhile, but expect those values to stabilize and likely increase once more when Canada’s legalization goes into effect.
One factor that is still causing uncertainty with MMJ stocks, particularly in the U.S., is Attorney General Jeff Sessions’ battle against the legalization of marijuana.
This may impact the trajectory of industry forecasts over the coming year, but, how and to what degree, no one can really say.
Perhaps what can be said is this: However much Sessions may like to enforce a crackdown on marijuana, President Trump has an already-bursting agenda for the year that is unlikely to include crusades against pot. (For more information on this topic, read Sessions’ Stand Against Pot Backfires, Raising Marijuana Stocks).
In sum, though the marijuana stock market is in a slump that is likely to get worse before it gets better, the industry forecast still looks promising.
Investors who are willing and able to ride out the tough times are expected to see upward trends once summer hits, and, with it, Canada’s legalization of recreational weed.
(For more information on Canada’s legalization coming up in July, read Canadian Financial Firms Catch a Contact From Marijuana Stocks.)