Cannabis investors might have to wait longer for legalization – The Average Joe

    Cannabis investors might have to wait longer for legalization

    Victor Lei — Head of Research

    February 2, 2022


    February 2, 2022

    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.

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