Why the Future of Marijuana Stocks Lies in the U.S. CBD Market

The U.S. CBD Market is Where the Future of Marijuana Stocks Lies
iStock.com/OlegMalyshev

U.S. CBD Market a Huge Opportunity for Pot Stocks

There’s no doubt a lot of hype surrounding the future of the marijuana industry in the U.S. But sometimes that hype can blind people to the progress being made right now, and with that progress comes lucrative opportunities for the savvy investor. The U.S. cannabidiol (CBD) market is fresh and growing, and we’re only beginning to see what that will mean for marijuana stocks.

While I’ve been covering this prospect for a while now—ever since the U.S. legalized CBD, so in 2019, for all intents and purposes—but we’re starting to see some real movement on this front.

Whereas before many marijuana stocks claimed to be looking to jump in to the U.S. CBD market, one has actually made the plunge: CannTrust Holdings Inc (NYSE:CTST).

CTST stock soared a whopping nine percent to start Wednesday, an especially high number considering what a slump the industry as a whole has undergone over the past few weeks.

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The company announced that it’s gaining access to 3,000 acres of farmland for hemp production in California via a deal with Elk Grove Farming Company, LLC. The joint venture will be split evenly between the two companies. (Source: “CannTrust Establishes U.S. Operations,” CannTrust Holdings, June 19, 2019.)

The deal will see CannTrust Holdings Inc sign a long-term lease for farmland and begin producing CBD for consumption in California. This marks the first serious foray into the U.S. CBD market right now made by a Canadian company, and a marijuana penny stock at that.

While other, larger companies like Canopy Growth Corp (NSYE:CGC) and Aurora Cannabis Inc (NYSE:ACB) have expressed interest in the U.S. market and claimed to be moving towards that goal, CannTrust is the first to strike with the announcement of this deal.

CannTrust Holdings says it sees this expansion as the first step toward exploiting the larger U.S. market in the future, which would see even further growth for CTST stock.

It’s worth noting that California, a single state with marijuana legalization, is a larger market than all of Canada.

While CBD sales will likely fall behind marijuana sales when all is said and done and legalization is fully enacted across the U.S., CBD gives marijuana stocks their first avenue of entry into the market. Considering the relative size of the Canadian market, being able to exploit the U.S. cannabis trade is a huge boon to Canadian pot stocks.

I no doubt believe that CannTrust Holdings will not be the last company to enter the U.S., with many others sure to follow suit in the coming weeks and months.

And with those entries, expect to see big marijuana stock growth.

Analyst Take

While CannTrust Holdings Inc will likely be the first to enter the market, it most certainly won’t be the last.

Many other pot stocks are angling to get in on the U.S. cannabis action and I imagine they won’t wait all that much longer, especially after seeing the warm reception that the market had for CTST stock.