The global marijuana market is growing, and investors are eager to invest in marijuana stocks likely to benefit from legalization. The opening of Canada’s recreational marijuana marketplace in October and the passage of propot laws in three more U.S. states mean the industry made big progress last year, but not every marijuana stock is worth owning. While there are plenty of investment options for investors, here’s why I think Canopy Growth (NYSE:CGC), Aurora Cannabis (NYSE:ACB), and KushCo Holdings (NASDAQOTH:KSHB) are top marijuana stocks to buy in 2019.
A market with momentum
Canada’s medical marijuana market has been a big success since rules were enacted in 2014 creating a licensing system. The medical marijuana market in Canada now serves hundreds of thousands of patients, generating hundreds of millions of dollars in sales for marijuana companies collectively.
The recreational marijuana market there could be far bigger, though. In October, a national marijuana market opened for business to higher-than-expected demand that resulted in product shortages. The initial demand could mean that recreational market sales will exceed $1 billion in Canada in 2019. According to Deloitte, recreational sales this year could eclipse $1.8 billion, more than double the $770 million it expects in medical marijuana sales.
In the U.S., the marijuana market could also experience breakneck growth in 2019. Last year, California’s highly anticipated recreational market opened for business, and that market alone could generate more than $5 billion in legal sales in 2019, according to BDS Analytics.
Additionally, Massachusetts’ first two recreational marijuana stores opened in November, and in their first five days, sales totaled $2.2 million. GreenWave Advisors estimates Massachusetts’ medical and recreational sales could be $230 million in 2018, and in 2019, its likely sales will be much greater than that as additional stores open and marijuana tourism increases. Following approval in Michigan in November, future dispensaries in that state could add meaningful revenue too.
Overall, 33 U.S. states have legalized marijuana in one form or another, including 10 states that have legalized its recreational use. U.S. spending on marijuana, including black-market sales, currently exceeds $40 billion. By 2030, it could reach $80 billion per year, according to research firm Cowen & Company.
No. 1: Canopy Growth
The planet’s biggest marijuana companies, including Canopy Growth, have been avoiding the U.S. marijuana market because marijuana remains prohibited federally. Soon, that could change following the passage of the latest U.S. Farm Bill, which was signed into law on Dec. 20.
In the past, farmers have been prohibited from growing hemp, a type of cannabis that’s low in the psychoactive chemical cannabinoid THC. However, industrial hemp is no longer a controlled substance following the Farm Bill, clearing the way for more widespread growth and more hemp-based products.
On the same day that President Trump signed the Farm Bill, Canopy Growth announced it will “participate in the American market now that there is a clear federally permissible path.” As part of its plan to profit from the shift, Canopy Growth acquired ebbu Inc. in October for about $330 million. That deal gave Canopy Growth intellectual property and research expertise into hemp cultivation that it believes positions it perfectly to accelerate production at its hemp farm in Saskatchewan and develop hemp-based products for use in cannabis-infused beverages and wellness products.
On Jan. 8, Canopy Growth updated investors on its progress, reporting…
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