Advertisement

The high is wearing off for investors in cannabis stocks

Cannabis stocks were white-hot last year. But many North American pot firms have now lost two-thirds of their value.

Legalisation in Canada and California meant that the cannabis sector was "white-hot" last year, says Kristine Owram on Bloomberg. Yet many North American pot firms have now "lost two-thirds... of their value". Canada's Canopy Growth Corporation, the world's largest, has reported poor sales.

The shares are down 47% so far this year. CEO Mark Zekulin told analysts that the "addressable market is only about half of what was originally expected", reports Ciara Linnane for MarketWatch. Cannabis retailer MedMen announced at the end of last week that it will cut "more than 20% of its staff" as it struggles with a cash crunch.

Advertisement - Article continues below

The industry faces several problems, says Owram. Efforts to legalise it in new markets have stalled, established black-market dealers are providing stiff competition and big institutional investors are sitting on the sidelines because the drug remains "federally illegal in the US". That leaves cannabis shares hostage to the whims of retail investors.

The market has become plagued by oversupply, adds Alexander Osipovich in The Wall Street Journal. Yet some analysts think that the recent falls are a buying opportunity. As more European and Latin American countries move towards legalising medicinal or recreational cannabis, the "long-term growth prospects" will still be tempting for some.

Advertisement
Advertisement

Recommended

Commodities look cheap
Commodities

Commodities look cheap

Gold may be on a bull run, but industrial commodities, including copper, zinc and aluminium, remain cheap.
17 Jan 2020
The British equity market is shrinking
Stockmarkets

The British equity market is shrinking

British startups are abandoning public stockmarkets and turning to deep-pocketed Silicon Valley venture capitalists for their investment needs.
8 Nov 2019
James Montier: valuations are way too high
Investment gurus

James Montier: valuations are way too high

The market is completely discounting the risk to the economy and operating as if there is nothing to worry about, pricing in a V-shaped recovery, says…
10 Aug 2020
Should Big Tech be broken up?
Tech stocks

Should Big Tech be broken up?

The dominance of the big four technology giants has attracted the attention of politicians determined to humble them. But what real harm are they doin…
8 Aug 2020

Most Popular

Eagle Lightweight GT: the reincarnation of the E-type Jag
Toys and gadgets

Eagle Lightweight GT: the reincarnation of the E-type Jag

Jaguar’s classic E-type sports car has been reinvented for the modern age. The result – the Eagle Lightweight GT – is a thing of beauty.
7 Aug 2020
Platinum: the precious metal that looks set to play catch-up with silver and gold
Silver and other precious metals

Platinum: the precious metal that looks set to play catch-up with silver and gold

Gold and silver continue to soar, but there's still time to get in. And there's another precious metal that looks set to go on a bull run too, says Jo…
7 Aug 2020
UK house prices hit a new record high – can it last?
House prices

UK house prices hit a new record high – can it last?

Despite the pandemic, UK house prices have hit a new high. John Stepek looks at what’s driving the surge in prices, and what it means for house prices…
7 Aug 2020