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.

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.

Recommended

Barry Norris: we’re already in the 1970s. Here’s how to invest
Investment strategy

Barry Norris: we’re already in the 1970s. Here’s how to invest

Merryn talks to Barry Norris of Argonaut capital about the parallels between now and the 1970s; the transition to “green” energy; and the one sector w…
19 May 2022
Tech stock crash – dotcom bust 2.0 is upon us
Tech stocks

Tech stock crash – dotcom bust 2.0 is upon us

It’s carnage in the tech sector as the market crashes. But that spells opportunity for canny investors, says Matthew Lynn
19 May 2022
The tech-stock bubble has burst – but I still want a Peloton
Stockmarkets

The tech-stock bubble has burst – but I still want a Peloton

Peloton was one of the big winners from the Covid tech boom. But it's fallen over 90% as the tech stock bubble bursts and and everything else falls in…
19 May 2022
Investor optimism ebbs in Indian stockmarkets
Emerging markets

Investor optimism ebbs in Indian stockmarkets

India’s BSE Sensex stockmarket index has fallen by almost 8% so far this year. Interest rates are on the rise, and foreign investors have been selling…
18 May 2022

Most Popular

Get set for another debt binge as real interest rates fall
UK Economy

Get set for another debt binge as real interest rates fall

Despite the fuss about rising interest rates, they’re falling in real terms. That will blow up a wild bubble, says Matthew Lynn.
15 May 2022
Is the oil market heading for a supply glut?
Oil

Is the oil market heading for a supply glut?

Many people assume that the high oil price is here to stay – and could well go higher. But we’ve been here before, says Max King. History suggests tha…
16 May 2022
Value is starting to emerge in the markets
Investment strategy

Value is starting to emerge in the markets

If you are looking for long-term value in the markets, some is beginning to emerge, says Merryn Somerset Webb. Indeed, you may soon be able to buy tra…
16 May 2022