In the latest Marijuana Market Update, I unveil my big prediction for the cannabis market in 2022 and answer a reader question about the pot stock Planet 13 Holdings (OTC: PLNHF).
Volatile Cannabis Market in 2021
Of course, no one has a crystal ball.
This is especially true in the stock market.
We’ve experienced the longest bull market run in recent history although outside factors tell us it should have ended a long time ago.
As for the cannabis market, we’ve seen a combination of strong headwinds:
- Tamped-down talk of federal legalization.
- Stalled banking reform for the industry in Congress.
Following the headwinds, we’ve seen tailwinds:
- Increased talk of federal legalization.
- More states legalizing adult-use cannabis.
- Increased revenue for multi-state operators along with smaller cannabis companies.
This combination led to the volatile cannabis market you see in the chart below:
The Money & Markets Cannabis Index equal weights all cannabis companies with market caps above $10 million.
In February, the index rose above 260 as talk of federal legalization reached a fever pitch.
As those discussions in Congress started to wane, so did cannabis stock prices.
Now, the cannabis index is only 39 points off its starting point from the beginning of the year.
I wish I could predict that we’ll see legal adult-use cannabis in 2022 … but I don’t think it will happen.
Congress just has too many issues to deal with (the battle over social justice measures and upcoming midterm elections, for instance).
Cannabis Sales 2022 Prediction
However, my big cannabis prediction is related to sales:
I project that cannabis sales in the U.S. will top $30 billion next year — setting a record and blowing past current projections.
Initial projections from Brightfield Group, which you can see in the chart above, suggested that legal recreational cannabis sales would reach around $21 billion this year and $23 billion in 2022.
However, those projections are from early in the year. The U.S. expects legal cannabis sales of more than $24 billion this year and $47 billion by 2026.
But I think the growth trajectory of cannabis sales will be much higher. We’ll add another $6 billion in sales next year, reaching $30 billion in total legal cannabis sales in the U.S.
One reason is because of the wave of cannabis sales since the COVID-19 pandemic. Analysts expected that wave to crash down in 2021, but it didn’t.
This year, we could see sales jump by as much as $6.9 billion over last year — a 48% jump — the highest dollar increase in U.S. history.
Colorado, Oregon and Washington expect an average of 26% year-over-year sales growth.
Illinois, Massachusetts and Michigan, on the other hand, average 136% growth, according to an August report from Marijuana Business Daily.
I think this trend will continue.
New markets in Connecticut, Montana, New Mexico, New York and Virginia could come online sometime in 2022.
Although the timeline for New York’s market opening is less clear, it will open one of the largest populations to legal cannabis.
The big driver of sales growth will be cannabis flower.
Brightfield projected flower sales to jump from $5.7 billion in 2020 to $7.2 billion this year, which you can see in the bar chart above.
However, I expect that total to hit $8 billion to $9 billion when the dust settles.
In 2022, initial projections were for flower sales of $9.7 billion, but I think a more realistic number is $11 billion to $12 billion.
That gives cannabis flower more than 45% of the total market sales of cannabis products.
And this is terrific news for cannabis investors.
Until banking reform becomes the law of the land, operators need a robust increase in sales to level up their balance sheets.
Plus, more capital allows them to invest more in operations or even investigate mergers and acquisitions, which has been strong in 2021.
So, my bold prediction for 2022 is that legal cannabis sales will top the $30 billion mark in the U.S.
More Money & Markets Predictions for 2022
The Money & Markets team has more bold predictions and insights into what's on the horizon in 2022:
- Beyond 2022: Invest in 5 Mega Trends for Multiyear Profits
- 2022 Market Prediction: Inflation’s Next Big Move
- 2022 Market Prediction: It’s Growth vs. Value All Over Again
- The Thing About 2022 Market Predictions…
Planet 13 Stock Forecast
Now, on to a reader question.
William emailed our team to ask:
I have an investment in Planet 13 (OTC: PLNHF) stock. Could you please give your input on this company? Do you see it going up in price? Do you see it profitable in the future?
Thanks for your question, William. Since we used your question, my team will reach out to set you up with our high-quality Money & Markets gear.
As for Planet 13, those of you who have followed our updates know that I had Planet 13 on our cannabis watchlist earlier this year.
I like the company. Its Las Vegas superstore is massive and recovered well after the COVID-19 pandemic shut down travel and tourism in the city.
It also opened a similar superstore in California, near Disneyland, with similar expectations.
However, its stock price got hammered after we sold the stock this summer. Take a look:
PLNHF Stock (Red Line) Plummets
As you can see, the stock plunged from a high of around $8 per share to $3 — a 62.5% drop.
It will take time for the company to realize both its investment in its California operation and the payoff from the Florida cannabis license it acquired in September.
Now, I still like Planet 13. I think it has strong operations and a solid expansion plan.
I think its price will rise in 2022, but it’s hard to say how soon.
It spent a lot of money on its expansion in California and the license purchase in Florida, one of the most robust markets in the country.
Takeaway: William, the answer to both of your latter questions is yes. I see PLNHF's share price going up, and I think Planet 13 will be profitable. It’s just a matter of time.
If you have a question about a cannabis stock or the market, just email me at Feedback@MoneyAndMarkets.com. Send us a question, we use it … and you’ll get free Money & Markets gear, like T-shirts, hats and sweatshirts.
Where to Find Us
Coming up this week, we’ll have more on The Bull & The Bear podcast, so stay tuned.
And check out our Ask Adam Anything video series, where we ask any question to chief investment strategist Adam O’Dell, as well as our Investing With Charles series, in which our expert Charles Sizemore and I discuss the trends you write in to ask about.
Also, you can follow me on Twitter (@InvestWithMattC), where I’ll give you even more insights, not just in the cannabis market.
Matt Clark, CMSA®
Research Analyst, Money & Markets
Matt Clark is the research analyst for Money & Markets. He is a certified Capital Markets & Securities Analyst with the Corporate Finance Institute and a contributor to Seeking Alpha. Prior to joining Money & Markets, he was a journalist and editor for 25 years, covering college sports, business and politics.