ACB +1.59% Add to/Remove from Watchlist CGC 1.34% Add to/Remove from Watchlist CRON +1.59% Add to/Remove from Watchlist TLRY +1.90% Add to/Remove from Watchlist GRWG -0.89% Add to/Remove from Watchlist YOLO -2.30% Add to/Remove from Watchlist SNDL +1.49% Add to/Remove from Watchlist
Cannabis stocks have been in a downtrend since 2020
However, the bears are showing signs of slowing down
And analysts predict strong growth for cannabis stocks in the next 12 months
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Ever since achieving an impressive run in 2020 and early 2021, buoyed by the prospect of federal legalization following the Democrats’ rise to power in the United States, Cannabis stocks have endured a long and catastrophic downward trend.
While the initial decline appeared to be a correction after a rapid and strong surge, it simply did not come to a halt. Disappointment over the lack of progress in federal legalization in 2021, coupled with , rising central bank rates, and oversupply leading to plummeting prices, have impacted the cannabis industry in 2022.
According to the Department of Justice, a pound of marijuana cost on average $6,000 in 2000. However, now, with the influx of new cultivators, supply has far exceeded demand, resulting in a market surplus and cultivators earning only $1,000 per pound for their products.
With lower prices and greater competition, it has become particularly tough for the sector’s companies to produce healthy margins — particularly in the face of the current inflationary macro environment. The significant drop in cannabis stock prices, thus, can be attributed, in large part, to the inability to cover cultivation expenses.
Will Cannabis Stocks Rebound?
The ETF AdvisorShares Pure Cannabis (NYSE: ), for instance, plummeted over 92% from its peak of $31.87 in February 2021 to a low of $2.53 this week.
YOLO Weekly Chart
However, the bearish trend shows signs of slowing down, suggesting a potential bullish reversal. Financially, this could be justified by the currently extremely low valuations of cannabis stocks.
Moreover, despite structural issues, the cannabis market holds a promising future, with most studies projecting an annual market growth rate of over 10% in the next decade.
While federal legalization may be delayed, it is widely acknowledged as a significant campaign issue for the 2024 presidential election, fueling hope and potentially driving a new bull market for cannabis stocks.
Considering this context, it is worth examining cannabis stocks closely to identify opportunities and pinpoint the best stocks to capitalize on the sector’s rebound in the second half of 2023 and beyond.
For this purpose, we turn to InvestingPro, mainly the Advanced Watchlist tool, where we have compiled the key U.S.-listed cannabis stocks: Tilray (NASDAQ: ), Canopy Growth (NASDAQ: ), Aurora Cannabis (NASDAQ: ), Cronos Group (NASDAQ: ), GrowGeneration Corp (NASDAQ: ), and SNDL (NASDAQ: ).
InvestingPro Watchlist
Source: InvestingPro
Based on an initial analysis, we observe the following:
All these stocks are considered undervalued or bargain opportunities by analysts.
Analysts predict strong growth for these stocks in the next 12 months, with expected performance ranging from +34.3% to +197.3%.
Except for one, all stocks are considered undervalued according to InvestingPro’s models.
All stocks have an average financial health score, either
Pro Research of the Week: Are Cannabis Stocks Ready to Go Higher Again?
