In this Marijuana Market Update, I look at the recent performance of the cannabis market.
I also dive into some interesting numbers concerning future cannabis sales and their economic impact.
Cannabis Market’s Recent Performance
First, let’s look at the one-year performance of the Money & Markets Cannabis Index:
The index is an equal-weighted value of all cannabis-related stocks on major exchanges with a market cap above $1 million.
After a lot of flat trading in the summer and fall of 2021, cannabis stocks took a big hit late in the year and continued their downward momentum into March.
However, later in March, stocks started to rebound, and we’re seeing another flat trading pattern.
For the last 12 months, our cannabis index is down around 39%.
We can turn to the year-to-date performance for a closer look:
We can see that cannabis stocks are averaging up in 2022.
There was a lot of flat trading in the first two months as the index needle barely moved. However, talk of the MORE Act in Congress, and the prospect of more states joining the legalization movement, pushed stocks higher into March.
Negative headlines out of Congress in late March pushed stocks back down, but we’ve seen a resurgence and the index value is up 3,000% from January 1, 2022 to April 18.
Cannabis’s Bright Future Despite Headwinds
Now, I’ll share some interesting data about the future of cannabis sales and the impact the cannabis market will have on the U.S. economy.
Analysis from the cannabis data firm New Frontier Data, released this year, shows the increase in projected U.S. legal cannabis sales.
The firm is projecting legal sales of around $32 billion in 2022 (I projected that sales this year would top $30 billion).
The analysis considers current state legalization efforts and the likelihood of new cannabis markets opening up by 2030.
From a projection of $32 billion in 2022, cannabis sales could grow to as much as $72 billion by 2030 — a compound annual growth rate (CAGR) of 14%.
New Frontier Data factored in new adult-use markets in New Hampshire, Rhode Island, Pennsylvania, Maryland, Ohio, Florida, Missouri, Oklahoma and South Dakota.
It also projected new medical-use markets in North Carolina, South Carolina, Georgia, Kentucky, Wisconsin, Nebraska, Kansas, Texas and Idaho.
Even if none of those states’ legalization efforts come to fruition, sales could hit beyond $57 billion by 2030 — growing at a CAGR of 11%.
Either way, it shows strong sales growth for the cannabis market in the years to come.
This next chart shows even more potential for the cannabis market:
A study done by Marijuana Business Daily outlined the potential total economic impact of the U.S. cannabis industry.
In 2021, that total impact should reach around $81 billion. (These numbers haven’t been released yet.)
By 2026, the total impact of the U.S. cannabis market could reach as much as $157.8 billion — a 94.8% increase from 2021.
The total economic impact measures more than just tax dollars collected from sales — which is something highly touted by cannabis legalization advocates.
Projections suggest that for every $10 spent at marijuana retail locations, an additional $18 is injected into the economy, mostly coming at the local level. That $18 includes the day-to-day needs of cannabis industry employees.
And, of course, taxes play a part. State and local governments could collect millions of tax dollars to fund schools, roads and more.
All this tells me that the future of the U.S. cannabis market, even without federal legalization, is bright.
Strong sales growth and broad economic impacts spell good things for cannabis operators in the future.
Unfortunately, cannabis investors (thus far) have not responded to the potential strength of the market.
But smart investors like you could see this as an opportunity to get in now when stock prices are undervalued … and trade on more than just headlines.
One more thing: You can get Money & Markets swag by submitting a question for me, Adam O’Dell or Charles Sizemore that we’ll use in any of our videos. Just send us your questions and feedback.
Where to Find Us
Coming up this week, we’ll have more on The Bull & The Bear podcast, so stay tuned.
Make sure you subscribe to our YouTube channel and get notified each and every time we post a new video.
We have a lot of great weekly video features on our channel, including:
- Ask Adam Anything — Where I get to sit down with Chief Investment Strategist Adam O’Dell and ask him any question (from you or me) and get his insights into the stock market.
- Investing With Charles — Green Zone Fortunes Co-Editor Charles Sizemore and I talk about all things related to stocks and the economy, including comparing stocks to give you the best investment advice.
- The Bull & The Bear — Our weekly podcast where I show you the trends and analysis that move the market.
All of these series are on our YouTube channel.
Also, you can follow me on Twitter (@InvestWithMattC), where I’ll give you even more insights, not just in the cannabis market.
Safe trading,
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.
