Cannabis Stock Demand Rises
In states where adult use recreational cannabis becomes available, consumers want more product than shops can supply. Will this create a cannabis investment opportunity as the rollout continues.
In Illinois, the first five days of availability of adult use recreational cannabis resulted in sales of $10.8 million. But it also meant that demand was so great that some shops had to cut off potential customers or close their doors altogether.
To stock investors, it is a temporary but troublesome situation. Some shop owners say the cutoff move is costing sometimes six figures per week. Consumers who had patiently waited for the chance to buy cannabis legally will have to wait legally.
Cannabis Investment Opportunity
To the savvy investor, is this a short term shortage or a longer term issue with the pipeline. Does this supply-and-demand issue present a cannabis investment opportunity. It has reached a point, according to an article in the StockMarketPress.com, where cannabis suppliers have had to invest in high technology security systems to protect their assets. Cannabis is in short supply and high demand.
Industry insiders term the shop closings and temporary inability to serve adult users of recreational cannabis an issue to be expected. Some call it a ‘speed bump’ in the early days of the recreational industry. As retailers abide by necessary regulations to put aside inventory of MMJ or medical marijuana for patients, the issue is only exacerbated. But to Wall Street, are the shortages a cannabis investment opportunity in a new industry?
Legal Purchases Denied?
The overwhelming demand creates a cannabis investment opportunity, but the opening week in states like Illinois presented a scenario where legal purchases of cannabis cannot be transacted. The infrastructure of wholesale supply from companies — both public and private — has been inadequate to meet demand.
Investors have to decide whether this is a cannabis investment opportunity or not. Long term, product supply will catch up with cannabis demand. But when will that happen. Will it overwhelm publicly held cannabis suppliers who have not yet had the opportunity to build out and complete their growing operations. This may be a cannabis investment opportunity, but when will wholesalers and manufacturing operations catch up with consumer demand for recreational and adult use product.
Consider the quick growth of the U.S. hemp-derived CBD market. It is estimated to jump from an estimated $5 billion market today by research firm the Brightfield Group to $24 billion by 2023. Where there be shortages and overwhelming demand or is the cannabis market unique to itself. Is this a cannabis investment opportunity for stock pickers.
In this parallel fast-growth market, Brightfield Group research finds that the CBD market will grow 706% from 2018 levels to reach that $24 billion by 2023, its report shows. Publicly held CBD companies are jockeying for position in this fast-growing market, seeking to cut costs as they maximize sales and grow market share.
Opening Week Jitters
A survey by Marijuana Business Daily (MJM) found that cannabis adult use recreational product sales reached $14.8 million the first five days it was available in California. Illinois was second at $10.8 million in that time period and, in turn, Illinois initially dwarfed demand in Massachusetts and Nevada.
Illinois cannabis retailers also must adhere to requirements about mandatory available stock retained for medical marijuana consumers. But all roads point to this being a short term issue and one that develops in a new, high growth industry. A cannabis investment opportunity is at hand, but it may take years for this industry to settle this issue — trading short term out-of-stocks now for larger sales later.