The Strategist

Analysts: Cannabis manufacturers are losing value

09/16/2021 - 06:37

The value of shares of producers and distributors of cannabis has been falling since the beginning of the year, in some cases the securities have already lost about 40%.

The value of shares of Canadian producers and distributors of cannabinoids for medical and recreational purposes has been declining since the beginning of this year. 

Canopy Growth Corporation plummeted 39% to $15.05 on NASDAQ (as of Monday, September 13), HEXO Corp. dropped even more, as its stock on NASDAQ and Toronto Stock Exchange lost 41% YTD and was trading at $2.17 and $2.77 CAD respectively as of Monday, September 13. 

Investors in the once-promising medical and recreational cannabis sector are disappointed as the process of legalizing marijuana in the U.S. drags on, and production companies have come under fire from criticism that they could "earn an income from addiction" if legalized, the Wall Street Journal wrote. 

At that, consulting companies still believe in this market. From this year through 2028, the global market for marijuana production and distribution will grow at an average annual rate of 26.7 percent to reach $70.6 billion in seven years, the consulting firm Grand View Research wrote in May. A September report by Global Industry Analysts said growth will be influenced by continued cannabis deregulation, growing public acceptance and availability in popular formats.

After more than 12 cannabis producers released their first-half financial statements, Bloomberg pointed out that almost all of the major companies reported sales growth of nearly 100 percent or more, and Todd Harrison, founding partner of New York-based CB1 Capital Management, said that while the industry used to be dominated by Canadian companies, now it's dominated by American companies. He compared this to the rise of Facebook, Amazon, Netflix and Google, which have replaced the leaders of the dot-com era.  He called Curaleaf, Green Thumb Industries, Trulieve Cannabis and Cresco Labs the "great four" in the reporting.