Cannabis investors might have to wait longer for legalization
Patience is the name of the game for investors waiting for an all-clear from Uncle Sam on cannabis legalization. Cannabis stocks are down 60% since last February — while the S&P 500 is up nearly 15%.
Hopes of legalization fell flat from Republican pushback and red tape. Could 2022 look different as support builds on both sides?
What are the chances of a 2022 move?
Over the years, the industry faced continued difficulties from a lack of White House support and access to banking services — with bills failing to pass the Senate. Despite legal issues, the sector is growing at a rapid pace — companies becoming stronger and more profitable.
- The $23B US cannabis market is expected to double by 2025.
- Trulieve (OTC:TCNNF) reported their 15th consecutive profitable quarter.
- Green Thumb Industries Inc.’s (OTC:GTBIF) earnings more than doubled.
Weed stocks are trading at such cheap valuations and with such solid financials and growth — they’re looking like both a growth and value stock.
2022 legalization on the table? Insiders believe federal reform still seems unlikely before the US November midterm elections. But cannabis is definitely on the agenda — with cannabis legislation on the 2022 ballots of states like Florida, Idaho, Mississippi and Ohio.
Big tech going green
In a surprising turn of events, cannabis saw support from one big tech company. Last week, Amazon (NASDAQ:AMZN) came out in favor of the GOP bill to decriminalize marijuana — which has impacted its ability to hire amid a labor shortage:
- Expunging some marijuana-related crimes would widen applicant pools.
- Easing criteria for drug testing would improve employee retention.
Amazon previously backed the industry in June when they endorsed the Marijuana Opportunity, Reinvestment, and Expungement (MORE) Act — sending cannabis stocks up.
Investors: Cannabis for value investors?
According to Aaron Edelheit of Mindset Capital, long-term investors looking for a good balance of growth, value and upside — should consider cannabis stocks. Many of these US cannabis stocks trade on over-the-counter exchanges — one of the few ways to trade them being the AdvisorShares Pure US Cannabis ETF (NYSE:MSOS).
- AYR Wellness (OTC: AYRWF) — saw annual revenue growth of 111% to 96.2M, with a target of $800M in 2022.
- Verano (OTC: VRNOF) — produced over $360M this year and is estimated to produce $600M in 2022.
Federal legalization would unleash strong demand towards these cannabis stocks — which have been unavailable to US investors. But be warned, changes of legalization in 2022 are looking slim.