After coming through a tough January, the marijuana industry seems to have weathered a necessary correction in what is proving to be a volatile, but, no less valuable, industry.
Canopy Growth Corp., the marijuana industry leader in Canada, suffered a large hit early this year.
The company’s share values dropped from $34 on January 9 to under $20 on February 2, for no compelling reason.
So, the underlying question for weed stock investors, industry players and analysts is this: did something happen on a fundamental level to disrupt the value of stocks for both the marijuana industry as a whole and Canopy Growth Corp specifically?
Analysts tend to agree the marijuana industry maintains its value and promising outlook with a high demand for both recreational and medical marijuana.
With no prospect of that changing, the business model and long-term potential for Canopy Growth cannabis in Canada remain solid and promising.
Gary Bourgeault, a research analyst, concluded that the correction “[Was] either investors taking some profits off the table, or new investors running for cover because they don’t understand the market and its accompanying volatility. More than likely it’s a combination of both.”
An important thing for weed stock investors to keep in mind is that, while growth projections are bound to differ from one researcher to another, what remains intact is the potential for growth within the sector.
To get an idea of those projections for marijuana industry growth in Canada, marijuana stock investors need to understand the numbers of users and sales.
For starters, a startling 4.9 million Canadians use pot. In 2017 alone, household marijuana consumption in Canada was roughly $5.75 billion, according to Cannabis Stats Hub, with about 90% of those sales coming from recreational pot. Pot prices per gram were about $7.43. The price of pot has dropped from 1989 to 2016 by $5.50 due to an increase in suppliers, but, with more consolidation of competitors in the industry, those prices may begin to rise.
The marijuana industry is also alive and well in the U.S.
Projected marijuana sales for 2017 were between $5.1 and $6.1 billion, with recreational pot dominating over the medical marijuana sector.
Not only does the marijuana industry as a whole still hold great growth potential, in both Canada and the U.S., but, the company narrative of Canopy Growth Corp. remains undisturbed in spite of its stock fluctuations.
The company’s production capacity only continues to expand, with plans in place for up to 3 billion square feet of greenhouse space in two different locations in British Columbia, once facilities are fully licensed. With 5.6 billion total square feet of production space in seven Canadian provinces, Canopy Growth is poised to lay hold of 20% of the market share once recreational pot is legalized in Canada.
What might have happened with Canopy Growth, according to Bourgeault, is that a number of new investors jumped in to purchase shares of weed stocks.
Bourgeault feels these new weed stock investors dove in without fully researching the marijuana industry or Canopy’s place within the market. The same fear of missing out on an opportunity that drove these new investors to jump in without performing due diligence might have also driven them to panic selling when the market corrected itself.
Now might be a good time, as the market corrects itself, for well-informed marijuana stock investors to consider Canopy Growth weed stocks to invest in. The value of the company’s stocks is likely to increase leading up to and following Canada’s planned legalization in July.
(For more information on Canopy Growth Corp. and Canada’s legalization, read O, Canada! Looking North of the Border for Pot Investment Opportunities.)