Strong Marijuana Stocks Prediction for 2020
The marijuana industry is as full of potential now as at almost any other time in its history.
That’s because, with all the initial hype beginning to fade, investors who truly see the potential in the pot industry are now set to profit. Marijuana stocks are well positioned to double or triple in value in 2020 and beyond.
Why? Because the industry is going to tackle its biggest competitor: the black market.
Marijuana Stocks & the Black Market
The marijuana industry has, since its inception, had one main opponent: illicit dealers.
While regulators and red tape have made legal marijuana more expensive as time wore on, the black market has had no such restrictions. Why come into the legal market and pay taxes and licensing fees when you can remain in the black market and produce the same product for much cheaper?
The decision is made even easier when you consider that black-market dealers were operating a monopoly for years. It wasn’t until recently—the past few years in most places—that recreational pot legalization was even being discussed.
Black-market dealers had a dedicated consumer base that trusted them for decades. There was no real push to either stop or make their operations legal.
All that could change in 2020.
You see, right now, one of the biggest areas of opportunity in the marijuana industry is the black market. In California, the largest recreational marijuana market on Earth, the legal pot sector is still being outsold dramatically by the black market.
An audit by the United Cannabis Business Association found that there are about 2,835 unlicensed weed dispensaries and delivery services in California. That number easily puts to shame the 873 licensed sellers. (Source: “Nearly 3,000 illegal marijuana businesses found in California audit, dwarfing legal trade,” Los Angeles Times, September 11, 2019.)
As you’d expect, that massive disparity in availability has played itself out in a glaring revenue deficit. Another industry-backed audit found that about $8.7 billion will be spent on unregulated cannabis in California this year.
In the same period, it’s expected that there will only be about $3.1 billion spent on cannabis sold by legal operators in the state.
If all that money could be brought into the legal market, licensed marijuana sales would catapult upward. And that upward trajectory would guide marijuana stock prices higher.
Can Marijuana Stocks Get the Upper Hand?
Right now, the legal marijuana industry is primarily focused on one thing: revenue and sales.
With pot stocks now having several major markets to operate in (Canada and several large U.S. states, not to mention all the medical marijuana markets around the globe), investors and analysts aren’t interested in expansion or supply capacity at the moment.
No, they’re interested in cold, hard sales—how much product a company can sell and how much of a profit it is making.
Many analysts’ expectations were not met when the weed market was legalized in Canada, and that’s mainly because of the black market.
If the black market were even to be marginally chewed into by the legal market, pot stocks would skyrocket as millions upon millions of dollars in revenue pour into legal companies.
And with all that newfound revenue, the companies could then set their sights on expansion once again.
Whether in Canada, the U.S., or abroad, the fact is that marijuana companies will need a good bit of cash to pay for these developments. That would be made possible instantly by all the black-market cash finally coming into the legal market.
So, we know what needs to be done in 2020 to spur marijuana stock gains; the next question is how.
It’s simple, really. Marijuana companies need to use their immense popularity (poll after poll is showing that marijuana is becoming increasingly accepted by residents throughout the industrialized world) and their many political connections to focus heavily on eradicating the black market—or at least taking away a large chunk of its power.
At the end of the day, it’s going to take governments and the private sector working in tandem to clamp down on illegal marijuana sellers.
We’re already seeing a lot of progress in this area, as Canada has recently legalized marijuana edibles. Now people who enjoy marijuana edibles will be able to go into legal stores to have their needs served. Considering that these products were formerly only under the purview of illicit dealers, this is a huge win for pot stocks.
Governments can also help by cutting away some of the red tape and onerous taxes from the industry, allowing legal weed to compete price-wise with black-market weed.
Some markets, like the medical pot market in Oklahoma, have done a perfect job of this, putting little to no restrictions on things like licensing.
Finally, another big blow aimed at the black market comes by way of things like cannabis-infused beverages. These are harder to imitate than other marijuana products, making them proprietary products that legal marijuana companies can use to lure people away from the black market.
And a lot of damage will be done by the black market—to itself. The vaping health scare sweeping the nation, for instance, is largely being fanned by illegal vaping products. Legal vaping products, on the other hand, have yet to cause the adverse health effects that have scared so many.
The future of the marijuana industry has never been as bright as it is today.
All it will take for pot stocks to reach their potential is a coordinated effort from both government and law enforcement, in conjunction with the private sector, to effectively terminate the black market and cause legal pot sales to surge.