In recent years, stocks in the cannabis industry have often fluctuated dramatically due to the prospect of marijuana legalization in the United States. This is because although the growth potential of the industry is significant, it largely relies on the progress of marijuana legalization at the state and federal levels in the United States.
Tilray Brands (NASDAQ: TLRY), headquartered in Canada, as a leader in the cannabis industry, typically benefits significantly from the wave of marijuana legalization. In addition, in order to reduce dependence on the cannabis business, Tilray has expanded its business scope and entered the alcoholic beverage market.
Irwin Simon, CEO of Tilray, stated that with the Republican government taking office in the United States, he believes marijuana legalization could become a reality during the Trump administration.
Legalizing marijuana may usher in an opportunity
After Trump won the US election in November 2024, the stock prices of many marijuana stocks almost immediately plummeted. For example, the market value of the AdvisorShares Pure US Cannabis ETF has almost halved since November 5th, as many investors believe that the Republican government coming to power is bad news for the industry, as Republicans typically take a tougher stance on drugs.
Nevertheless, Irwin Simon remains optimistic. In a recent interview, he believed that marijuana legalization would become a reality at some stage of the Trump administration. He pointed out that this industry can boost the overall economy while generating tax revenue for the government, and its importance is self-evident. For example, marijuana sales in New York State alone reached approximately $1 billion this year.
From a national perspective, Grand View Research estimates that the size of the US cannabis market may reach $76 billion by 2030, with an expected annual growth rate of 12%. However, the growth of the industry in the next five years will mainly depend on the advancement of the legalization process.
Should investors remain optimistic about the recent legalization of marijuana?
This optimism is not the first time it has appeared. From historical experience, although industry CEOs have repeatedly hoped for the legalization of marijuana, significant changes have rarely occurred. For example, in previous election campaigns, Trump has shown an open attitude towards relaxing marijuana control and stated, “We don’t need to ruin people’s lives, nor do we need to spend taxpayers’ money to arrest people who hold small amounts of marijuana.” However, during his first term, he did not take any significant measures to promote marijuana legalization.
Therefore, at present, it remains uncertain whether Trump will prioritize the marijuana issue, and whether the Republican controlled Congress will pass relevant bills is also highly questioned.
Is cannabis stock worth investing in?
Whether investing in cannabis stocks is wise depends on investors’ patience. If your goal is to pursue short-term gains, it may be difficult to achieve a breakthrough in legalizing marijuana in the near future, so marijuana stocks may not be suitable as short-term investment targets. On the contrary, only those with long-term investment plans can reap returns in this field.
The good news is that due to the uncertain prospect of legalization, the valuation of the cannabis industry has fallen to a low point. Now may be a good time to buy cannabis stocks at a low price and hold them for the long term. However, even so, for investors with lower risk tolerance, this is still not a suitable choice.
Taking Tilray Brands as an example, despite being one of the globally renowned cannabis companies, the company has still accumulated losses of $212.6 million over the past 12 months. For most investors, pursuing safer growth stocks may be a more practical choice. However, if you have enough time, patience, and funds, the logic of holding marijuana stocks for the long term is not unfounded.
Post time: Jan-09-2025