Why Now Is the Best Time to Invest in the Cannabis Market

Medical cannabis is already legal in most U.S. states, and 10 states have legalized cannabis for recreational use. At the beginning of the year, shares of cannabis producers were rising rapidly, but the second quarter turned out to be weak. The sector is currently facing ongoing supply issues, which has led to challenging times. Could this be the perfect moment to invest?

Performance of Leading Cannabis Producers

Among the top cannabis producers, CannTrust Holdings showed the worst results in the second quarter of 2019, with its shares dropping by 36.5% in the U.S. and 37.5% in Canada. Aphria (-30%) and Tilray (-24.5%) also suffered significant losses, along with Hexo, Aurora Cannabis, and Cronos Group.

However, it’s worth highlighting Canopy Growth—the world’s largest cannabis producer—whose shares fell only 4% in the U.S. and 6.5% in Canada from April to June, even though the company’s losses were four times higher than analysts had expected.

Strong Yearly Performance Despite Short-Term Declines

Despite the price drops in the second quarter of 2019, shares of leading cannabis producers continue to show strong year-over-year performance.

While some companies posted weak results last quarter, it’s important to look at the bigger picture. Almost all cannabis producers delivered solid returns in the first half of 2019, with only a few exceptions. Here’s how some stocks performed in percentage terms during the first half of the year:

• Aurora Cannabis: +49.2% in the U.S., +44.7% in Canada
• Cronos Group: +40.9% in the U.S., +36.4% in Canada
• Canopy Growth: +40.8% in the U.S., +34.6% in Canada
• Hexo Corp.: +40.36% in the U.S., +34.16% in Canada
• Aphria: +15.6% in the U.S., +13% in Canada

Expert Opinions and Market Potential

According to Gary Korolev, a private asset manager at Sovereign, shares of cannabis producers are highly promising. Bank of America Merrill Lynch estimates the global legal cannabis industry and its related products at $15 billion per year, with the potential to grow to $166 billion by 2025. Experts believe that further legalization in the U.S. could serve as an additional catalyst, potentially boosting the market by an average of 40%.