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This year, has been tough for cannabis stocks, with the Cannabis ETF tanking more than 44%. Investors were pretty hopeful of a federal reform soon. However, President Biden, unfortunately, didn’t follow through with his campaign oath to decriminalize cannabis. In fact, lawmakers disapproved of a law that would permit marijuana companies to access the banking system in the country.
But things aren’t that gloomy for the cannabis industry heading into next year. Let’s admit that both parties have already wished for a legislation to legalize marijuana. In reality, almost two-thirds of Americans want marijuana to be legal, per a recent Gallup poll, citing a business insider article. Additionally, Pew Research Center’s study showed that a staggering 91% of adults in the United States favor legalizing cannabis, as mentioned in a route-fifty article.
Thus, investors can expect cannabis legalization to happen sooner than later. Chuck Schumer, the Senate majority leader, is already leading the reform efforts. He is determined to pass a comprehensive cannabis legalization bill, not a smaller bill like the SAFE Banking Act. What’s more, Canadians have also started to bet on U.S. cannabis legalization. Some of the major Canadian cannabis companies have decided to acquire a stake in their U.S. counterparts if, or when, marijuana gets legalized federally in the United States. In fact, these companies are now willing to venture into the U.S. market as their scope for growth in the Canadian market is limited, thanks to cannabis being already legal in their country.
In the United States, nonetheless, 18 states have already legalized the recreational use of marijuana, while 36 states have legalized it for medical purposes. In recent times, many lenders are also increasingly confident about the cannabis companies’ financial stability and are now willing to offer them better deals, a tell-tale sign that a banking reform on marijuana is in the cards. To top it, the broader cannabis industry is widely projected to expand in the near future. To put things into perspective, analysts from investment bank Cowen expect the marijuana industry to touch $100 billion in market value by 2030, quoting the business insider article.
Similarly, in the United States, cannabis consumers are likely to grow to 50 million by 2025, as mentioned in a statista article. But it’s just not in the United States, the global cannabis market is projected to see a CAGR of 26.19% to $128.92 billion by 2028, citing a globenewswire article.
With the cannabis industry positioned to expand and legalization of marijuana in the cards, stocks like Cronos Group CRON, Canopy Growth CGC, and Innovative Industrial Properties, Inc. IIPR are sure to benefit.
Cronos engages in the investment in firms that are licensed to produce and sell medical marijuana. This Canadian company is expected to acquire a stake in PharmaCann once cannabis gets legalized in the United States. Cronos’ shares, by the way, are down this year but its expected earnings growth rate for the next year is a solid 38%. The Zacks Consensus Estimate for its next-year earnings has moved up 8.8% over the past 60 days.
Canopy Growth is a cannabis company in Canada, which is also expected to make in-roads in the U.S. market once marijuana is legalized. Canopy Growth offers dry cannabis and oil products, primarily under the Tweed brand. Canopy Growth’s expected earnings growth rate for the next quarter is a promising 71.2%. In fact, its projected earnings growth rate for the next five-year period is 44.1%.
Innovative Industrial Properties is a real estate investment trust. It is focused on the acquisition, ownership and management of specialized industrial properties leased to experienced, state-licensed operators for medical-use cannabis facilities. In this process, Innovative Industrial Properties is reaping rental income. Innovative Industrial Properties’ expected earnings growth rate for the next quarter and year is an encouraging 36.7% and 31.9%, respectively.
Currently, Cronos, Canopy Growth and Innovative Industrial Properties have a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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