Marijuana News Today
The most exciting thing in the marijuana news today is the explosion of Tilray Inc (NASDAQ:TLRY), but also in the news is another strong outlook for the pot sector from a Wall Street analyst.
The analyst in question is Cowen Inc‘s Vivien Azer, one of the top marijuana analysts on Wall Street.
Azer projects that the U.S. marijuana market will reach $80.0 billion by 2030. This is revised up from her previous projection of $75.0 billion, and represents a strong increase from the current $50.0-billion U.S. cannabis market. (Source: “Marijuana could be the biggest growth opportunity for struggling beverage-makers as millennials ditch beer for pot,” Business Insider, January 10, 2019.)
This continues the trend of top players on Wall Street expressing bullish views about the legal marijuana industry.
The important thing to note is the clout that these analysts have in swaying opinion.
Wall Street is a tight-knit bunch. As more positive outlooks come from respected analysts, we’re likely to see an increased willingness to engage with the cannabis sector—something that has been lacking for a while now among big U.S. institutional investors.
It’s not only trepidation regarding marijuana’s reputation as an illicit drug that prevents banks from going full-on into pot; it’s mainly the federal ban on marijuana in America.
The result is that Wall Street is going to continue warming up to marijuana at its own pace—though that slow pace would be radically quickened by pot reform on the federal level.
In any case, we’re seeing the seedlings of marijuana acceptance begin to sprout as more and more good news comes from Wall Street regarding the pot industry.
There’s only so long that banks and other institutional investors will want to stay out of what is otherwise a very lucrative business. As such, they will likely begin to find ways around the feds (legally, of course) and push for pot reform that, at the very least, allows them to profit more readily from the already burgeoning trade.
This further cements what is now common knowledge: the legal marijuana industry is going to be a global powerhouse in the near future, and investors who are able to play the market well will be swimming in money.
Not to mention that, as banks become able to invest more readily in pot, marijuana stocks will be supercharged by the influx of capital.
As I mentioned in the intro, the biggest marijuana news today is Tilray stock’s massive jump in early-morning trading. TLRY stock climbed nearly 20% to start the day, and is up a whopping 41% over the past five days.
So far, 2019 is looking to be very strong for marijuana stocks. While I anticipated a large rally in my earlier articles (barring a broader market downturn), January was on the early end of my projected timeline, so this is welcome news indeed.
The correction is definitively dead, and many marijuana stocks have seen high double-digit returns in the past few weeks.
Tilray stock in particular has been shooting up today—partly due to Privateer Holdings Inc, a private equity firm, being very bullish on the stock.
Privateer holds 75 million shares in lock-up that is ending next week, but the company claims that it has no intention to move those shares—at least not in the first half of 2019. (Source: “Tilray (TLRY) Shareholder Privateer Holdings Says it Does Not Plan to Sell Shares When Lock-up Expires,” StreetInsider.com, January 11, 2019.)
“Privateer Holdings strongly believes in Tilray’s long-term global growth strategy and pioneering role in shaping the future of the legal cannabis industry,” wrote the company.
When we decide to distribute shares, we will do so in an orderly and deliberate manner to maximize tax-efficiency considerations for Privateer investors, while also taking into consideration potential impacts on Tilray’s public float. And we will do it in a way that reflects our long-term confidence in Tilray’s business model and management team.
The fact that this huge shareholder is very bullish on TLRY stock will likely have a positive effect on share prices, with many investors scrambling to get a piece of the remaining pie.
Tilray stock’s float has always been rather small, which has helped spur price growth and helped limit the ability of short-sellers to get ahold of the stock—since loaning it out comes at a high premium (see yesterday’s “Marijuana News Today” article).
Overall, TLRY stock is in a commanding position, and I expect it to continue to experience success in 2019—even if today’s massive burst sparks a market backlash.
Not to be outdone by its competitor, Canopy Growth Corp (NYSE:CGC) is keeping pace with Tilray stock, even if Canopy Growth stock didn’t see its own burst of gains today.
CGC stock climbed 3.5% in early-morning trading—a respectable, if modest rise when compared to Tilray. Nevertheless, over the past five days, the stock is up about 39%.
So while Tilray has experienced a big jump today, CGC stock has favored a slow and steady approach. Frankly, I prefer that approach, since it’s less likely to cause an immediate market backlash after a massive single-day gain.
Furthermore, Canopy Growth is being bolstered by its plan to enter the U.S. hemp market in the wake of the U.S. 2018 Farm Bill, which legalized the cultivation of hemp on a national scale.
Canopy Growth added strategic hemp assets to its portfolio in 2016, with a focus on consumer-packaged goods. The company ramped up its hemp investments in 2017 when it began to realize the full potential of the crop.
“Canopy has been preparing for and investing in this opportunity for several years now, through strategic acquisitions, infrastructure expansion, and extensive internal research and development,” said Bruce Linton, CEO of Canopy Growth. (Source: “Canopy Growth (CGC) Will Enter U.S. Hemp Market,” Stock News, January 10, 2019.)
Linton continued, “With the door now open, we are moving fast to bring our considerable resources to establish the same market leadership position internationally that we have earned in the Canadian cannabis market.” (Source: Ibid.)
Canopy Growth is focusing on innovative ways to harvest and process hemp. It has already harvested over 4,500 acres of genetically engineered cannabidiol (CBD)-rich hemp in Saskatchewan, Canada. The company expects an annual yield of about 7,000 kilograms of hemp-derived CBD.
While the regulatory framework for CBD is still being worked out in the U.S., Canopy Growth is going to store its CBD inventory until such a time that it can legally send it into the U.S. market. That puts the company in an enviable position.
Which all means that, as usual, I’m bullish on Canopy Growth stock.
TLRY and CGC Stock Performances
The performances of TLRY stock (black line) and CGC stock (blue line) over the past week are seen on the chart below.
Chart courtesy of StockCharts.com
There’s a lot to like about the marijuana news today.
Both CGC stock and TLRY stock are up big over the past five days. Tilray stock in particular has been soaring today.
Meanwhile, future projections for the marijuana sector continue to proliferate, and more and more of those projections are coming from respected Wall Street analysts. That speaks to a growing acceptance of the industry.
Frankly, there’s a lot of potential in marijuana, and investors might want to take advantage of this boom market.