Why Invest in Marijuana THC Breathalyzer Stocks?
Everyone knows that marijuana stocks outperformed in 2017, but few people are aware of this small, explosive niche in the cannabis market: marijuana breathalyzer stocks.
This growing trend is excellent for equities like the two companies we’ll look at below. First, though, we have to consider why there is surging demand for marijuana tetrahydrocannabinol (THC) breathalyzers in the first place.
The answer is, of course, public safety.
Pot smokers are notoriously casual about the risks of smoking and driving. A recent survey showed that 40% of marijuana users drove less than two hours after smoking, which is less than half the wait time suggested by U.S. authorities.
So whether you agree with marijuana legalization, there’s no denying that smoking and driving is an extremely dangerous thing to do. Studies have found a “direct relationship between blood THC concentration and impaired driving ability.” (Source: “Does marijuana use affect driving?,” National Institute on Drug Abuse, last accessed April 24, 2018.)
To make matters worse, we have virtually no idea what happens when people mix marijuana consumption with alcohol consumption. All we can say for sure is that the effects of each substance are compounded.
In other words, legalizing marijuana is a nightmare for law enforcement.
With alcohol, there is an established procedure: walk in a straight line, count backwards from 100, and blow into this breathalyzer. But with marijuana, there’s no way of establishing whether someone is inebriated.
Enter, marijuana breathalyzers.
These devices are exactly what they sound like: handheld tools that police use to measure THC content. Almost everyone is on board with them, aside from a few hippies and libertarian nutjobs, meaning there is a market opportunity here.
Think about it: 29 U.S. states have legalized cannabis in one form or another. All of these jurisdictions will need a clear, objective way of scouting impaired drivers. THC breathalyzers seem like the obvious answer.
There are two companies that manufacture marijuana breathalyzers: Cannabix Technologies Inc (OTCMKTS:BLOZF, CVE:WPO) and a San Francisco-based startup called Hound Labs, Inc.
Although both companies are promising, retail investors can only invest in the former. Since Hound Labs is still a private company, you can’t find Hound Labs stock listed on a stock exchange.
Hound Labs got an $8.1-million funding round from Benchmark Capital, a major venture capital company that made early bets on Uber Technologies Inc., Snap Inc (NYSE:SNAP), Dropbox Inc. (NASDAQ:DBX), and WeWork.
So maybe we’ll hear more about Hound Labs down the road. But for now, there’s no point in discussing the company’s valuation because retail investors don’t have access to its funding rounds.
Cannabix stock, on the other hand, is a small-cap marijuana stock that trades at roughly $1.40. Let’s take a closer look at that particular investment opportunity.
Chart courtesy of StockCharts.com
Cannabix Technologies News
Cannabix (and Hound Labs) are trying to do something that no one has done before: quantify the intoxication level of marijuana users without a blood test.
That’s an uphill task.
Trace compounds from marijuana stay in the bloodstream for days and weeks afterward, meaning that blood samples can’t show if someone is high right now. Marijuana breathalyzers would solve that problem by measuring THC on someone’s breath.
Cannabix is using field asymmetric waveform ion mobility spectrometry (FAIMS) for its devices. Catchy name, right? The company filed a second patent to that effect on April 16, thereby layering each new beta test with greater legal protection.
However, there’s still one glaring problem with the innovative technology.
No one knows how much marijuana is too much. For alcohol, there’s a well-accepted threshold of 0.08% of alcohol in your bloodstream. What’s the marijuana equivalent? Is it higher or lower?
Law enforcement officials are still grappling with this question, which, in other words, means that marijuana measurements are pretty toothless at the moment.
Should I Invest in Cannabix Stock?
On one hand, Cannabix Technologies is obviously in the right place at the right time.
It is a small-cap marijuana stock at the heart of an emerging trend. Marijuana legalization is sweeping across North America (notwithstanding U.S. Attorney General Jeff Sessions), investors are looking for yield, and only a handful of competitors exist.
Cannabix has a chance to capture lightning in a bottle if it can perfect marijuana breathalyzers, but that’s the sticking point—if it can perfect the technology. There is no guarantee.
This situation reminds me of biotech stocks. You bet on the possibility of drug approval by the U.S. Food and Drug Administration (FDA). If you bet right, it’s straight to the penthouse. If you bet wrong…well, investing is a risky business.
Put another way, Cannabix Technologies is a company with no revenues, but it has millions of dollars in research and development (R&D). No wonder the market is “hot and cold” on Cannabix stock. You can see that, last year, investors were flying high on the stock, doubling the share price within a matter of months.
When the broader market took a tumble at the start of the year, however, BLOZF stock went down harder and faster than most. Why? Because it has very little to stand on, other than the promise of future contracts and perfected technology.
To recap, Cannabix stock has both extreme upside and downside. It is a play for risk capital investors.
As such, my BLOZF stock forecast is split between the short and long terms. I believe that investors can “trade the rumor, sell the news” on this one, because, sooner or later, governments are going to need devices to use on roadside marijuana stops.
That could lead to resurgence in investor optimism, but it won’t last for long. Eventually, Cannabix will become vulnerable to a long product cycle. It also has very few options for sideways growth, meaning that its bright spark will probably fizzle out.