Sizing Up the Cannabis Opportunity

Nicholas Kitonyi  |


The cannabis industry is currently one of the best attractive markets to invest in. This is largely down to the increased legalization and adoption in the U.S., which statistically represents the biggest opportunity for investors looking to invest in cannabinoid related products and recreational marijuana.

The cannabis industry has always been one of the biggest markets in the world with most of the business taking place in the black market due to strict regulations. However, over the last few years, more states in the U.S. have legalized certain applications of the cannabis plant including in therapeutics, as well as, cannabidiol oils.

Nearly all U.S. States have legalized some form of cannabis use

To bring things into perspective, 46 of the 50 U.S. states have legalized the use of cannabis in at least one of medical cannabis, cannabidiol oils and recreational marijuana. That is a huge step forward considering the fact just a few years ago marijuana was classified amongst the most dangerous drugs under (Schedule I) for illegal drugs. This changed in 2016 when the U.S. drug enforcement administration reclassified it to schedule II (dangerous drugs—potentially leading to severe psychological or physical dependence).

Since then, the cannabis industry in the U.S. has witnessed an upsurge in adoption with recreational marijuana supplementing the progress made in the medical cannabis segment. The increased legalization has helped put the U.S. at the top of the list of markets where legal cannabis sales take place. According to a report published by Sensi Seeds last month, over 90% of all legal cannabis sales take place in the U.S. while the U.K., Canada and the Netherlands are the world’s largest exporters.

New Zealand, Australia, Uruguay and Israel are also quickly becoming some of the leading exporters of the product. As such, the cannabis industry appears to be extending its addressable market quicker than most would have predicted, and this ties up well with the expectations for the next few years.

In the last couple of years, recreational marijuana has gained traction in the U.S. market and is now legal in at least nine states while more have softened their stance and look to introduce some form of limited legalization.

Medical cannabis is a key growth catalyst

The U.S. medical cannabis market continues to be the main growth driver with analysts already predicting that it will cross the $10 billion market value within the next four years growing at a CAGR of 13.6%.

One of the reasons behind the rapid growth of the medical cannabis market in the U.S. is because of the increasing need for better medication options. According to reports, about 44% of America’s 331 million people, which equates to about 119 million are in some form of medication.

Many of them are on medications that have several side-effects while some are even life-threatening. Furthermore, there are several people who are on a combination of medications and this makes it even more perilous for patients.

However, cannabinoids, the active ingredients in the cannabis plant are natural substances. According to research, this makes them safer thereby providing an interesting alternative to other medications. This presents the cannabis industry with a huge opportunity that could help disrupt the multi-billion pharmaceuticals market.

Many pharmaceuticals companies have shown interest in the medical cannabis market recently following the approval of GW Pharmaceutical’s  (GWPH) Epidiolex drug. When launched, Epidiolex will be the first FDA-approved, CBD-derived drug on the US market for the treatment of epilepsy. Analysts see this breakthrough as first of many to come.

In addition, many people that suffer from chronic pain are also expected to boost growth in the medical cannabis industry as they look for alternatives to opioid-based medications.

Industrial hemp is also soaring

Another segment of the cannabis industry that is tipped to drive growth is hemp cosmetics. As mentioned earlier, cannabidiol oils is one of the highly legalized cannabis extracts in the U.S. It has been playing a crucial role in the industrial hemp market, which is expected to grow at a CAGR of about 14% to a value of $10 billion by 2025. Cannabidiol oils are used in soap, shampoo, body lotions, and hair care products, and many cosmetics manufacturers have made it a crucial ingredient of their cosmetics products.

Industrial hemp has also benefited from the textile industry with the strong, hypo-allergic, and UV light resistant characteristics of its hemp fibers increasingly becoming a popular raw material in the manufacturing sector.

Conclusion

In summary, while pharmaceuticals companies will be competing to launch cannabinoid-drugs to rival existing medications, startups in the recreational marijuana market will also seize the opportunity presented by increased legalization in the U.S. On the other hand, industrial hemp products, especially those used in textile and cosmetics industries will present hemp growers with more cause for optimism for the foreseeable future.

DISCLOSURE: No position in stocks mentioned and I do not plan to take any position within the next 72 hours.


The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
GWPH GW Pharmaceuticals Plc 171.15 4.63 2.78 560,764 Trade

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