The relaxation of U.S. laws prohibiting the recreational and medicinal use of marijuana has created a host of new public companies hoping to catch lightning in a bottle, and for good reason. According to industry experts, legal cannabis is on track to post 60% growth this year, raking in over $2.5 billion in revenue. Even more impressive is the fact that the plant’s use is still banned in most states, and completely at the Federal level. In short, the marijuana industry has ample room to grow going forward.
Because the recreational marijuana market alone could potentially quintuple in value by 2019, “marijuana stocks” saw their market caps explode northward earlier this year. Now that the inevitable problems associated with any new industry have reared their ugly head–such as banks refusing to provide loans, we have seen most of these same stocks fall, almost as rapidly as they went up. That being said, the industry appears to have momentum on its side as more states consider decriminalizing marijuana. So the question, then, is simple: Is now the perfect time to buy marijuana stocks?
Marijuana stocks have had a turbulent year
The rise and fall of marijuana stocks is perhaps best captured by the medical marijuana company GW Pharmaceuticals , and by Medbox, on the distribution side, illustrated by the chart below.
At one point this year, GW shares had risen close to a mind-boggling 1100% in roughly a year’s time, but have recently dropped by nearly 30% from their former highs.
Medbox’s story is equally as impressive. Its shares rose hugely from their 52-week lows this year, only to crash in stunning fashion.
Given that marijuana stocks have been rapidly declining for some time, we can’t point to the general market correction as the underlying cause, although it probably is helping to drive them even lower …read more