Green Light for Marijuana Market to Move Higher

marijuana market bull
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The Move to Legalize Marijuana Could Take Off

Circle October 17 on your calendar, because that will be the day that Canada becomes the first western country to legalize marijuana for recreational use.

The Canadian situation will be closely monitored by countries around the world that are also looking to legalize recreational marijuana.

If things in Canada go as well as many expect, pundits predict that the wave could spread to Europe and the United States, where nine states and the District of Columbia have already legalized marijuana. California is the biggest legal marijuana market in the country.

There is really no consensus on how large the legal marijuana market can grow, but the general feeling is that the adoption of recreational marijuana will take a big chunk from the unregulated marijuana business carried out on street corners and alleyways.

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Researchers estimate that the North American legal marijuana market could surge to around $47.3 billion by 2027, up from $9.2 billion in 2017. The global market could reach $57.0 billion. (“Legal Cannabis Industry Poised For Big Growth, In North America And Around The World,” Forbes, March 1, 2018)

Those numbers could be conservative, depending on how many other countries decide to legalize marijuana.

Two Marijuana Stocks to Watch

On the smaller end, an intriguing marijuana play is Emerald Health Therapeutics Inc (OTCMKTS:EMHTF, CVE:EMH), which has a market cap of $410.5 million.

Emerald Health Therapeutics is approved to produce marijuana in Canada, which is a key step to becoming a key player in the sale of marijuana.

The company is currently developing a 1.1-million-square-foot greenhouse to grow marijuana in a 50/50 venture with Village Farms International Inc (OTCMKTS:VFFIF, TSE:VFF) in British Columbia.

Once completed, the facility will have an annual capacity of 165,000 pounds of marijuana. That’s a lot of weed.

Emerald Health Therapeutics is also constructing a 500,000-square-foot hybrid indoor and greenhouse marijuana facility in Vancouver and is in the process of retrofitting a 75,000-square-foot facility in Quebec that is estimated to be able to farm 22,000 pounds per year.

Chart courtesy of StockCharts.com

If you are looking for a bigger marijuana producer, a good fit could be mid-cap Aurora Cannabis Inc (OTCMKTS:ACBFF, TSE:ACB), with a market cap of almost $4.1 billion.

Aurora Cannabis has been a consolidator in the marijuana space and is in the process of acquiring MedReleaf Corp (OTCMKTS:MEDFF, TSE:LEAF) in a CA$3.2-billion deal.

Chart courtesy of StockCharts.com

Aurora Cannabis currently has over 2.0 million square feet of growing facility, not including the addition of MedReleaf.

At full production, Aurora Cannabis will produce more than 530,000 pounds of high-grade marijuana annually.

In addition to the Canadian market, Aurora Cannabis has ventures in Germany, Denmark, Italy, and Australia.

Analyst Take

Aurora Cannabis is much further along and is a bigger player than many companies in the legal marijuana sector. That’s why it is one of the top picks.

Emerald Health Therapeutics is more of an emerging company and offers a higher risk-to-reward opportunity.

Including both stocks in an investment portfolio would spread out the risk.