up more than 50%.” data-reactid=”11″>Right now there’s arguably no hotter industry on the planet than cannabis, and it’s been reflected in the valuations of nearly all marijuana stocks. Since the year began, well over a dozen of the most popular pot stocks are up more than 50%.
A quick overview of the industry provides evidence of why marijuana stocks have been unstoppable. In just the past six months, Canada became the first industrialized country in the world to legalize recreational weed; additional U.S. states gave the green light to medical marijuana, pushing the number of states to have legalized in some capacity to 33; and Wall Street analyst coverage has commenced with some lofty price targets.
$75 billion by 2030, with Jefferies seeing an outside opportunity of the industry reeling in $130 billion annually at its peak. At $130 billion, the pot industry would be essentially double the size of the global soda industry. It’s these lofty forecasts, along with triple-digit sales growth, that have investors piling into pot stocks.” data-reactid=”13″>According to a report from Arcview Market Research and BDS Analytics, the global cannabis industry generated $12.2 billion in sales last year. However, investment bank Cowen Group foresees the industry growing to $75 billion by 2030, with Jefferies seeing an outside opportunity of the industry reeling in $130 billion annually at its peak. At $130 billion, the pot industry would be essentially double the size of the global soda industry. It’s these lofty forecasts, along with triple-digit sales growth, that have investors piling into pot stocks.
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a lot of money. The need to ramp up capacity, build and market recreational or medicinal brands, research new products for adult-use or medical purposes, lay the groundwork to move into overseas markets, or make acquisitions has pretty much doomed every major pot stock to ongoing operating losses. In other words, the industry is a fundamental nightmare.” data-reactid=”27″>But there’s just one problem: With the exception of a very small handful of marijuana stocks, they’re nearly all losing money. In some instances, a lot of money. The need to ramp up capacity, build and market recreational or medicinal brands, research new products for adult-use or medical purposes, lay the groundwork to move into overseas markets, or make acquisitions has pretty much doomed every major pot stock to ongoing operating losses. In other words, the industry is a fundamental nightmare.
(NASDAQ: AMZN). Amazon lost copious amounts of money in the late 1990s and throughout the 2000s as it built itself into an e-commerce giant. It continually reinvested a majority of its operating cash flow back into the business in order to emphasize long-term growth over short-term profits. And, as the results show, it did quite well for itself.
lost 192 million Canadian dollars on an operating basis. But because the company has been on an acquisition binge for more than a year now, it’s vaulted into the top spot in terms of projected peak annual production. Yours truly estimates that Aurora Cannabis can produce 700,000 kilos annually at its peak. Thus, the company’s lack of profits and its immense dilution are moot points because Amazon succeeded by reinvesting in itself, and so can Aurora.” data-reactid=”29″>This is an argument I run into often with a company like Aurora Cannabis (NYSE: ACB). Through the first six months of fiscal 2019, Aurora Cannabis has lost 192 million Canadian dollars on an operating basis. But because the company has been on an acquisition binge for more than a year now, it’s vaulted into the top spot in terms of projected peak annual production. Yours truly estimates that Aurora Cannabis can produce 700,000 kilos annually at its peak. Thus, the company’s lack of profits and its immense dilution are moot points because Amazon succeeded by reinvesting in itself, and so can Aurora.
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