Anyone who predicted that broad legalization of cannabis for medical and recreational uses, still gathering momentum around the world, would translate into an easy payday for growers and investors, were disabused of this pleasant vision over the last year. Earnings of major growers and retailers have disappointed, sending pot stocks spiraling downward. Nonetheless big players are undeterred, evincing confidence that 2019’s misfortunes were a temporary blip for the industry. The upbeat attitude is reflected in big mergers and acquisitions still going forward.
- First the bad news: earnings per share had lagged far behind expectations, per Bloomberg. There’s also lack of visibility, with a spread in analyst expectations for earnings per share of $1.15 for ten big pot producers — a bigger range than for companies in sectors like energy, utilities, and industrials.
- Due in large part to the lack of visibility, pot stocks have tumbled by over half from their peak valuations earlier this year: the Horizons Marijuana Life Sciences Index ETF is down about 53% since March 19, Bloomberg reports.
- But investors are plowing ahead. A separate Bloomberg piece reports that Curaleaf Joe Lusardi is doubling down on the company’s investments in the sector. That includes Curaleaf’s $948 million acquisition of Select, which supplies vaping oil.
- Lusardi argues that the recent vaping public health scare, which has been linked to illicit products, will actually be a good thing for the legitimate cannabis business, telling Bloomberg: “What this is highlighting is there are a lot of people making really illicit products out there, and it’s screaming for regulation, for controlled cannabis. Consumers will become more aware of what they’re using and look to the regulated markets for products that are tested, regulated, and, frankly, safe.”