Feeling Risky? Marijuana Stocks May Jump From Legislation

PUBLISHED Jul 17, 2022, 6:53:45 PM        SHARE

img
imgOwen Rust

If you're looking for growth stocks, one area of potential growth is recreational marijuana. Cannabis stocks are probably not a big part of most investors' portfolios, but that could change as the United States moves closer and closer to nationwide acceptance of recreational marijuana. Over the past decade, nineteen states and Washington, D.C. have legalized recreational marijuana, which is a tremendous market expansion!

Bullish: Why Marijuana Might Grow

Potential Big Boost: a Senate Bill

The Cannabis Administration and Opportunity Act is set to be introduced this coming week after receiving feedback from key committees last year. This federal law would decriminalize recreational marijuana nationwide by removing it from the list of controlled substances. While the likelihood of it passing in its direct form are slim, as it would require ten Republican votes to avoid a filibuster, there is a chance that Republicans are willing to consider a liberal-leaning Democratic bill in the political aftermath of the Roe v. Wade reversal and the January 6 committee hearings.

State-by-State Legalization

In 2022, five states have marijuana legalization on the ballot. If all of them pass, it would be a significant expansion of the recreational marijuana market.

Long-Term Outlook on Marijuana is Optimistic

Polls indicate significant majority support for the legalization of marijuana, and political support for going after those accused of using marijuana illegally has decreased. Historically, this makes sense in comparison to the failure of Prohibition by the early 1930s. Optimists for legalized weed envision a swift growth of the industry post-legalization.

Big Tobacco May Merge With Big Cannabis

One of the biggest cannabis stocks, Cronos Group (CRON), received a $1.8 billion investment from tobacco giant Altria (MO) in 2021. If federal legalization of marijuana does come to pass, look for experienced tobacco growers to leap at the opportunity to expand into a new cash crop. Cannabis startups would likely be snapped up, with the buyouts benefiting stockholders.

Bearish: Startups and Stigma

Cannabis Companies are New

Like any startups, cannabis companies are risky. After all, legalized marijuana has only existed in any form in the United States for about ten years. This means it's still highly volatile, even with "angel investors" from Big Tobacco. Even though CRON has strong financials and expanding revenue year over year, its stock price has fluctuated due to recent economic turmoil.

Little Love From Big Finance

Partially because of high risk, and partially due to lingering stigma over marijuana being an illegal drug, big finance companies may not want to underwrite cannabis startups. This can result in cannabis firms operating on shaky foundations, with relatively little cash. Sure, the product is popular...but producers need to have solid business practices and cash reserves in case of recessions.

Culture Wars Return

While Western society has certainly moved strongly in the direction of accepting recreational marijuana, recent years have seen a resurgence of alleged "far right" conservatism in both the U.S. and Europe. It remains to be seen whether the "culture wars" will result in attempts to re-criminalize marijuana, but they could certainly slow the expansion of de-criminalization. Liberals, facing attacks on multiple fronts, will likely put marijuana legalization on the back burner. Politically, pushing for recreational marijuana is not a hot topic in 2022 with everything else going on.

Bottom Line: Buy if You're a Risk-Taker

If you want some excitement, it's probably okay to stray from blue chips and buy some CRON. Although the consensus right now appears to be a hold from analysts, they do project its revenue to grow. While liberals may not be willing to push hard for legalization, I don't think that conservatives will want to push back. I predict at least some of the five states with marijuana legalization ballot initiatives in 2022 will legalize it, expanding the market. And, just like with alcohol stocks, a recession won't necessarily put a damper on demand for weed - it's a stress reliever!



I/we have no positions in any asset mentioned, but may initiate a position over the next 7 days

CRON, Buy

Cronos Group Inc
Return: -12.50%

CRON, Buy

Return: -12.50%


Sound investments
don't happen alone

Find your crew, build teams, compete in VS MODE, and identify investment trends in our evergrowing investment ecosystem. You aren't on an island anymore, and our community is here to help you make informed decisions in a complex world.

More Reads
IS VISA STOCK A BUY? WHY & WHY NOT?
Image

Is Visa stock a buy? Let's discuss why it is a strong buy and why it is not due to the pro-cyclical nature of the stock!

Is Rivian a Buy Right Now?
Image

Take a Look at the Hot New EV Release

Should You Buy Tesla Stock?
Image

Should you buy Tesla Stock right now or after the much-awaited Tesla Stock Split expected in August?

PFIZER COMPANY AND ITS STOCK ANALYSIS AND FORECAST
Image

Pfizer, the world top class company, develops and manufactures drugs or medicine and vaccines, having approximately 3.7 billion shares on NASDAQ.

Why Should You Know About Amazon Stock?
Image

Amazon issued its IPO at $18 per share trading under the NASDAQ with symbol AMZN. Subsidiary companies Zoox Kuiper System Amazon Lab126 Amazon Web Service.

ETSY: A TOP GROWTH LONG STOCK
Image

ETSY is a well-run company and a reasonable investment for a long-term investor. The company's unique business model is increasingly taking it to the top of the game. ETSY has become the top e-commerce go-to for consumers in many categories, especially hand-made and vintage collections.

Why Adobe is a Long Buy and Analysis of Q2 Fiscal 2022
Image

When considering to purchase, it is wise for an investor to analyze a stock's past performance. Adobe stock has been growing steadily and consistently in the past. As expected with any stock, it has fluctuated from time to time, depending on the market factors, but the performance has been good overall.

With Oil Sky High, is Exxon a Buy?
Image

Pain at the Pump May Tempt Investors to Grab Big Oil

Here's How You Can Pay Your Utility Bills With Sempra Energy Stock Dividend
Image

Amid rising energy prices and the inevitable recession, the Sempra Energy Stock dividend is something you can rely on.

Why is Dominion Energy Stock Dropping? Is It Still Safe to Invest?
Image

Dominion Energy Stock is dropping for a long time, yet its dividend has not stopped attracting investors.

NIO STOCK FORECAST
Image

NIO is a multinational automobile manufacturing company. It is a Chinese company. Its headquarter is in Shanghai China.

Dow Jones & Company
Image

Dow Jones & Company is considered one of the world's largest business and financial news companies.

IS IT GOOD TO BUY OR SELL AMC STOCK NOW?
Image

AMC (American multi-cinema) Entertainment Holding, Inc. is an American movie theater chain. AMC is one of the largest movie theater chains in the world.

Why you should invest in Middlesex Water Company
Image

Water is life. With inelastic demand, the potential in the utility industry is inexhaustible. Therefore, investing in a water services company is a good bet. But why invest in Middlesex Water Company?

Astra Space Inc. NASA Rocket Failed to Deliver
Image

What is likely to happen in the next 72 hours is a further bludgeoning of Astra's Stock Price. But is it still a long term opportunity?

Is Disney a Buy?
Image

Post-Pandemic Entertainment vs Inflation/Recession

IS ZOOM STILL A BUY?
Image

During the pandemic, Zoom experienced fast accelerated growth with spectacular earnings. Its stock traded at among the highest prices in the market. Today, pre-pandemic cultures have resumed, and the video communications growth has slowed down. Is its stock still a buy?

Resources for Publishers
Resources for New Investors
Boosted with BossCoin
Financial Literacy Leaders
user_profile
Tom Hamilton
user_profile
Wise Intelligent
user_profile
Mark Robertson
user_profile
Kevin Matthews II
user_profile
Akeiva Ellis
user_profile
Brendan Dale
user_profile
Kenneth Chavis IV
user_profile
Sharita Humphrey