The cannabis industry is being flooded with new information daily. As Canada begins its recreational cannabis program and businesses continue to experiment with new products, cannabis stocks have been experiencing relative volatility in recent months. Continuing with this trend, Canadian cannabis stocks Tilray and Canopy Growth saw large losses in U.S. markets. According to CNBC, Aurora Cannabis also saw sharp losses after its debut on the New York Stock Exchange.
Cause for Concern?
On Tuesday, October 23rd, Tilray fell 1.4 percent in U.S. trading, while Canopy Growth also slipped 1.4 percent in Canada. Aurora Cannabis dropped 14 percent during it’s Tuesday New York Stock Exchange debut. Though the losses experienced by major cannabis stocks in October could worry some investors, they shouldn’t.
The biggest contributing factor for the losses is likely excitement leveling off after the legalization of recreational cannabis in Canada and several other positive pieces of cannabis-related news drove prices to unrealistically high levels. Following the cool down of cannabis news, the stocks reverted back to prices that are more realistic.
Bennett Gross, president of Los Angeles-based L&S Advisors, believes that large cannabis stocks are geared towards the future and investors shouldn’t be concerned over short term results. He stated, “It’s about owning a piece of an industry that’ll be much bigger in five to 10 years. Prohibition ends only once, and this industry could be worth tens of billions of dollars.”
Why Cannabis Stocks Are a Good Bet
According to a study conducted by Gfk MRI, in collaboration with Miner & Company Studio, an estimated 38 million-plus U.S. adults, or 16 percent of the adult population, use cannabis, with 10 percent of the population consuming it at least once a month and 4 percent using on a daily basis. While that consumer base is massive, it is still expected to grow within the next few years as more U.S. states prepare to legalize cannabis for either medicinal or recreational use.
Along with a large consumer base, the cannabis industry is expected to grow astronomically in the next few years providing many opportunities to up and coming companies looking to grow themselves and their stock profiles.