Business

Marijuana stocks could emerge as an unlikely safe haven for investors who want to invest but worry about the pandemic.

The stock market’s rapid fall and subsequent rise in the wake of the pandemic were enough to give investors whiplash.

Now traders are facing a dilemma. They can jump into an increasingly frothy market or stand by and miss out on further gains. But there is one unlikely segment that looks relatively insulated: marijuana stocks. 

On June 3, The Los Angeles Times reported that the budget proposed by Governor Gavin Newsom projected a decline in California’s cannabis sales. COVID-19 induced a recession in the US economy, which could drag cannabis sales down. At the beginning of this year, Newsom expected the excise tax on cannabis to bring in $479 million this year. For the fiscal year starting on July 1, he expects an excise tax of $590 million.

Though a dozen states have proposed cannabis initiatives, these states have the best chance to "go green" on Election Day.

Despite its numerous growing pains over the past year and change, marijuana remains one of the fastest expanding industries on the planet. After logging $10.9 billion in legal worldwide sales in 2018, Wall Street has global pot sales hitting anywhere from $50 billion to $200 billion by 2030.

The cannabis market in Illinois has been growing despite the COVID-19 pandemic. Illinois legalized recreational cannabis on January 1, 2020. Since then, the sales have been surging. The pandemic might have affected all of the other sectors but it helped marijuana sales. Consumers stocked up on marijuana to ease their anxiety and panic amid the crisis.

As it contends with the ongoing coronavirus pandemic, Missouri's health department published its first constitutionally required annual report to the governor on the fledgling medical marijuana program.

California’s legal marijuana industry faces a year of declining sales as a result of the pandemic-induced recession despite an initial spike in consumer demand after dispensaries were deemed essential businesses, according to details outlined in Gov. Gavin Newsom’s proposed budget.

Newsom projected in January that the state’s cannabis excise tax would bring in $479 million this year and $590 million in the fiscal year starting July 1, but his revised budget now forecasts just $443 million this year and a decline to $435 million next year.

New opportunities emerge for cannabis retailers.

With the progressive legalization of cannabis in the USA, eCommerce platforms are set to expand — offering opportunities for cannabis retailers. If at first, cannabis and eCommerce didn’t work in pair, the current demand for legal cannabis products (THC and CBD) have set a new dynamic for retailers. And despite a pandemic, the industry is set to create 340,000 jobs within the next 4 years.

• Despite a tough year for the industry, followed by the bigger economic downturn as a result of the coronavirus pandemic, analysts said they're optimistic about the cannabis market today.
• According to Michael Lavery of Piper Sandler, companies have had time to prove themselves and investors have a better idea of how they think the space will play out.
• Cowen's Vivien Azer said that the industry is seeing more institutional interest as a result and that she sees that interest tending to favor the operators that are already profitable.
• Analysts pointed to so

The industry is now in a situation where tens of companies are fighting for a much smaller pie than forecasted

Some of the biggest cannabis players when legalization took effect 20 months ago have successfully held on to their dominant positions, despite a year of bankruptcies, downsizings, revoked licences, executive firings, mass layoffs and a long market selloff. 

Canopy Growth’s (WEED.TO)(CGC) chief executive officer expects the United States cannabis market to open up at the federal level as early as 2022 as pressure builds from state governments embracing recreational pot sales.