Battle Over Marijuana Advertising Will Determine How High Marijuana Stocks Can Go

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Marijuana Advertising and MedMen Enterprises

As marijuana continues to enter the mainstream, we’re seeing the industry mature. And as it does, it is going to have to answer some serious questions.

Everything, from logistics to storage to licensing to enforcement of pot laws, all has to be dealt with, but one important area doesn’t quite receive as much attention as it should: marijuana advertising. Marijuana stocks are going to be hugely impacted by how marijuana advertising laws shake out, and that’s what makes the most recent development in this area so seismic.

MedMen Enterprises Inc (OTCMKTS:MMNFF, CNSX:MMEN) is the largest publicly traded U.S. marijuana company. And like any large company, MedMen wants to build its brand. That’s where marijuana advertising comes into play.

The company recently enlisted famed director Spike Jonze to produce a commercial for the company. It’s pretty good. But aside from the quality of the ad itself, it is going to get played on several television channels.

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This is in stark contrast to the kerfuffle over the Super Bowl marijuana advert, which was never shown.

And that brings us to the larger question: what will marijuana advertising look like?

For those of you who believe that this has nothing to do with pot stocks, I have another question: when was the last time you saw an advertisement for cigarettes? How about beer?

Now ask yourself how the national conversation about the two vices has changed dramatically. Look at domestic sales, and voila, the stakes are suddenly daylight-clear.

The fact is that if governments choose to treat marijuana like beer—which is to say, an adult-use consumable that is generally pretty free to advertise—it could have a huge impact on sales and how the drug is distributed. Cigarette advertising rules, on the other hand, compel companies to put gruesome images on their packages and deny them the ability to advertise effectively.

Canada is struggling over this issue as we speak, and the U.S. will certainly have its time grappling with marijuana advertising in the near future.

The best-case scenario for marijuana stocks is if the government chooses to treat the drug like alcohol. That will allow marijuana companies to not only compete for more consumers, but also better compete with themselves by establishing brands that will help differentiate them from one another.

The power of a strong advertising campaign on sales is not to be underestimated, so marijuana bulls will have a whole other metric with which to evaluate pot stocks.

On the flip side, laws more akin to cigarette regulation will see companies dramatically curtailed in terms of what they can do advertising-wise. That will hurt marijuana sales in the long term, but also diminish brands and make it more difficult to discern one marijuana stock from another—or at least, eliminate an important criterion.

All this is to say that the battle over marijuana advertising is worth paying attention to, and marijuana investors ought to keep watch for developments in this sphere.

MedMen Stock

Since I mentioned the largest U.S. marijuana company at the beginning of this piece, let’s take a look at MedMen stock.

As much as I liked its commercial, the company has been disappointing on the stock market.

Year-to-date, MMNFF stock is down about eight percent. That’s in stark contrast to the massive gains we’ve seen out of a good number of premier marijuana stocks.

While being the largest marijuana company in the U.S. sounds impressive, ultimately MedMen stock has failed to deliver.

Chart courtesy of StockCharts.com

Not to mention that companies that proclaim themselves the “X of pot” like MedMen tends to rub me the wrong way. They play on the hype of the industry rather than by actually delivering tangible results. Of course, a good company can do both, but for now, this company seems to be more about buzz than bucks.

MedMen stock has potential—especially as a long-term play when the U.S. marijuana legalization eventually lands—but in the lead-up to that, I’d look north for better marijuana stock choices. They have a bigger market, are on major U.S. listings, have a larger international presence, and overall are far more mature than MedMen.

Analyst Take

Marijuana advertising may not seem like it’s going to make or break pot stocks, but it will have a profound impact on the future of share prices across the industry.

How companies are able to market marijuana is going to impact sales as we move forward. In turn, sales will be the main factor in determining stock movement after we get past the early rush of legalization hype.

All of that is a long way of saying that the ceiling of the marijuana industry will be determined by how governments treat the drug—and advertising is a huge part of that.