Is Long-Term Projection for Marijuana Stocks Still Bright or Is Momentum Flagging?

Where Pot Stocks Could Go in 2022

To some, it might be a little concerning to realize we’re already through two-thirds of the year. With most of 2021 in the rearview mirror, it’s time to consider what 2022 holds for marijuana stocks.

I, for one, continue to be very bullish on pot stocks.

It’s worth noting that I’ve long been a buy-and-hold evangelist when it comes to the marijuana industry. And, frankly, that strategy has made many investors a lot of money.

Some of the marijuana stocks I’ve been writing about for a few years, like Innovative Industrial Properties Inc (NYSE:IIPR), Curaleaf Holdings Inc (CNSX:CURA, OTCMKTS:CURLF), and Canopy Growth Corp (NYSE:CGC)—though CGC stock was certainly more dependent on timing than the other two—have seen huge gains.

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Chart courtesy of StockCharts.com

Altogether, early investors in pot stocks have been reaping huge gains for years. However, it’s never a good idea to assure yourself of future success because of past performance.

Having said that, the future remains bright for marijuana stocks.

Many of the positives that got the market to its current height in the first place are still there, while newer breakthroughs continue to drive the market forward. Those breakthroughs could help the market ascend to new heights in 2022 and beyond.

Now, I’ll be totally upfront here: predicting the state of the economy in 2022 is a tough game.

There are many factors to consider, including how the continuing COVID-19 pandemic will be managed, how much money the Federal Reserve will continue to pump into the market, how low interest rates will remain, and the extent of the pent-up investing and spending by white-collar workers who were essentially homebound for a year.

But here’s what is easy to predict: there will be growth in the marijuana industry.

The cannabis sector has advanced by leaps and bounds in the last few years, from full legalization in Canada, to amazing strides in the U.S., to inroads in Europe, South America, and the Middle East.

The expanding legal marijuana market has investors salivating at the opportunities that billions of dollars in projected revenue (the marijuana black market is worth over $100.0 billion) will bring to the pot companies that are able to best capitalize on the situation.

Legalization, it must be said, is a fickle game, reliant on—at times—skittish politicians who are often from an older generation and have a War-on-Drugs mindset (at least in the U.S.).

That’s changing, of course, as the old guard is cycled out for new blood with much more libertarian views on marijuana usage, but that will take time.

As it stands, federal legalization in the U.S. (the Holy Grail of the marijuana market, as I call it, due to its size) is closer to becoming a reality than ever. It’s also still a few years away, with President Joe Biden being a bump in the road in the progression toward legalization, with his aversion to any sort of pro-marijuana legislative action.

Having said that, the majority of Americans support marijuana legalization, and state legislators have had some success in passing bills that end pot prohibition at the state level (and they’ve increasingly been doing so without holding voter referendums first).

This increasing political comfort with marijuana bodes well for the future of pot stocks. But while state-level legalization is going to keep going apace, we can’t count on federal legalization anytime soon.

But, as I said earlier, one thing we can count on is continued growth.

First, we’re going to see the marijuana black market slowly be eroded as more people eschew their old dealers in favor of legal businesses. That process is being accelerated by falling legal pot prices as production becomes more efficient.

Another big boon is that marijuana stocks are, by and large, well regarded by retail investors. And considering what we saw happen with GameStop Corp. (NYSE:GME) and similar “meme stocks,” there’s a decent chance that more retail investors will set their sights on pot stocks.

Better yet, marijuana stocks have a lot of realistic potential growth paths that I’d argue are very probable. Not a lot of meme stocks can say the same.

And here’s some more good news: pandemic or no, vice goods—as they’re commonly referred to—are recession-proof. Alcohol, for instance, actually sees increased sales during economic downturns, and early evidence suggests that the same holds for marijuana.

So, even if we see more economic lockdowns in 2022 (let’s collectively hope we don’t), there’s no reason to suspect it would severely impact marijuana companies’ revenues, and it might even encourage higher sales.

Analyst Take

All this is to say that 2022 looks like it could be a great year for pot stocks. There’s already a decent chance of a rally in the sector’s future, due to deflated marijuana stock prices as fallout from the early-pandemic market panic.

Taken in sum, there’s a lot of momentum behind pot stocks.

I’ve been writing about marijuana stocks for years now, and this is as good an opportunity as there’s ever been, provided that investors choose the correct stocks.

There’s still so much room for pot stocks to grow, and in that growth, many investors will likely see huge gains.