Marijuana News Today: Booming CBD Market Strong Indicator of Future Pot Stock Potential

Marijuana News Today
iStock.com/Darren415

Marijuana News Today

It’s bittersweet in the marijuana news today as we look at the cannabidiol (CBD) market’s popularity in Canada leading to another shortage of cannabis products across the country.

The Canadian marijuana market has been fighting shortages ever since it opened over half a year ago. Usually, the reporting on those shortages has been limited to covering marijuana, but now we’re seeing CBD oil also fly off the shelves at accelerating rates. (Source: “Retailers struggle to keep popular cannabis extract CBD on shelves in Canada,” Global News, May 6, 2019.)

Spurred on by new and older consumers, CBD oil promises to treat a lot of ailments, like insomnia and anxiety. The science has yet to be settled on just how effective a treatment CBD oil is, but there’s sufficient hype around the cannabis extract that consumers in both the U.S. and Canadian markets are flocking to stores to partake.

Both Canada and the U.S. have far laxer laws governing the cultivation of hemp than they do for marijuana. Hemp is a cannabis plant that is high in CBD but low in the high-inducing tetrahydrocannabinol (THC).

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This makes CBD harvesting a far easier proposition compared to marijuana. Still, just because it’s easier doesn’t mean it is problem-free.

And with the rush of consumers hitting Canadian stores in droves, some stores simply aren’t able to keep up with demand.

This is, however, a good thing for investors. Seeing huge consumer demand means that sales are likely to be strong for years to come. The CBD market especially could be extremely profitable, since it does not carry the same stigma as marijuana.

Pot companies should be grateful to see such an onrush of desire for their products. The next step, of course, is finding a way to better serve consumers by keeping store shelves stocked.

Part of that, as I’ve covered before, is a government problem. Overregulation has traditionally plagued marijuana markets during their transition from illegality to legality. This process has played out in Canada, with all sorts of government-imposed barriers preventing marijuana companies from keeping store inventories full.

These regulatory problems will ultimately be solved. As governments and individuals grow more accustomed to marijuana as a legal good rather than an illicit drug, regulations will likely be relaxed, allowing marijuana companies to reach their true sales potential. Remember that product sales will generate those coveted positive financial reports, which in turn will spur share price growth.

The takeaway, then, is a positive one: there’s a huge demand for marijuana and CBD products in Canada, as evidenced by products leaving store shelves faster than business owners can fill them.

At the same time, government regulation has gotten in the way of pot companies reaching their full potential. And until that problem is solved, we’ll see shortages for a while yet. They will be solved eventually, but the sooner the better for marijuana investors.

CGC Stock

Mirroring the marijuana news today, we had a down morning for pot stocks across the board. We saw roughly two- or three-percent losses, with almost every pot stock we cover on the downswing.

This is likely a mini-market correction that I think will subside sooner rather than later.

I’ve been hyper-cautious in 2019, often predicting longer-term corrections at the first sight of a downturn. Those predictions were wrong and I’ve come to respect the staying power of pot stocks more than ever.

That doesn’t mean corrections are impossible, but rather that the industry is maturing to a point where the long, drawn-out down periods are likely to be few and far between.

One of the pot stocks hurting this morning is Canopy Growth Corp (NYSE:CGC). Canopy Growth stock fell by about two percent in early-morning trading, with the drop today capping a seven-point decline over the past five days.

There hasn’t been much in the news to generate this type of downturn for CGC stock. Instead, I believe this fall to be a function of the stock’s strong growth as of late.

Again, this could be the start of a longer correction, but I don’t think it will be. I believe that today’s stock action simply is a market pullback by investors who have seen dramatic growth in 2019 and are wary of bubbles—and rightfully so.

But I don’t think we have anything to fear from a marijuana stock bubble. The industry is already proving that the sales figures are there, with huge movement of pot products in Canada and U.S. states where marijuana has been legalized.

Pot stocks will likely bounce back from this fall and make a quick recovery in the coming days and weeks.

CRON Stock

Perhaps one of the hardest-hit pot stocks on the marijuana stock market today is Cronos Group Inc (NASDAQ:CRON). Cronos stock tumbled by four percent in early-morning trading today and it has fallen six percent over the past five days.

CRON stock likely remains one of the most volatile pot stocks around, due to its massive growth over the past year.

While many stocks have seen 100%-plus gains over the past 12 months, Cronos is among the pack leaders, with gains around 175%. That huge growth spurt is likely to set off a few alarm bells among more cautious investors, and therefore I predict that Cronos stock will maintain a higher level of volatility relative to its competitors.

Other marijuana companies of Cronos Group’s size are going to see stock-price stability begin to set in, but CRON stock’s presence on the Nasdaq, coupled with its recent huge gains, will ensure that it likely remains one of the more fluid stocks.

CGC Stock and CRON Stock Performances

The performances of CGC stock (black line) and CRON stock (blue line) over the past week are seen on the chart below:

Chart courtesy of StockCharts.com

Analyst Take

While product shortages are hardly positive, the marijuana news today does give us reasons to be excited about the future of the pot industry.

The booming CBD market is just another example of all the ways that the cannabis market is growing. While I’d like to see sales hit their full potential, that will come in time as the industry sorts itself out. As it stands, the strong demand is a good indicator of the future potential of pot stocks as the Canadian market develops balance.

Meanwhile, the downturn in the pot stock market this morning is concerning, but I believe that marijuana stocks will bounce back in short order.