Marijuana Market in Colorado Just Hit This Milestone – The Fool Motley

Marijuana has been legally available in Colorado for recreational use since 2014, and the appetite of consumers for marijuana products continues to grow due to the launch of new products, including concentrates and edible products. In the first six months of 2018, unit sales of cannabis concentrates skyrocketed by 94.6% and sales of edible units jumped 13.8% from a year ago. 39; another. As a result, annual marijuana sales in Colorado exceeded $ 1 billion in August – a first for now.

If we believe the Colorado cannabis market, the future is bright for companies in the market, including California and Canada, which have legalized marijuana for adult use this year.

The numbers that matter

There has been a debate about how much money would go from black market to regulated markets after legalization, but the Colorado experience suggests that it is substantial.

In its first year of legalization, Colorado has announced marijuana sales of nearly $ 684 million. Last year, annual marijuana sales in Colorado reached a record $ 1.5 billion. On the basis of cumulative sales of $ 1.02 billion in August, this year's total will be even higher. Matt Karnes of GreenWave Advisors estimates that marijuana sales in Colorado this year could reach $ 1.6 billion.

Data Source: Colorado Department of Revenue.

The growth of the marijuana market in Colorado is particularly impressive, as gram prices have fallen due to overproduction. In addition, the average monthly sale of flowers sold to consumers increased only 1.4% in the first half of this year.

According to the Colorado Marijuana Enforcement Division, the state has grown an average of 40,656 more plants per month in the first half of 2018 compared to a year ago. The growing availability of marijuana has driven down prices per pound of marijuana buds, from nearly $ 1,300 at the beginning of the year to less than $ 800 this summer. As a result, the slight increase in marijuana sales this year is mainly due to the increasing adoption of products using marijuana as an ingredient rather than dried marijuana.

The increase in marijuana sales is also good news for Colorado taxpayers, who have seen the state coffers grow by several hundred million dollars since legalization. So far this year, Colorado has pocketed more than $ 200 million in taxes from the sale of legal weeds.

Larger markets mean greater opportunities

Marijuana is still illegal at the federal level, but more and more states are adopting pro-pot laws, and countries other than the United States are preparing for the legalization of marijuana.

In the United States, the largest market to date for approving marijuana for recreational purposes is California. California was the first state to legalize marijuana for medical purposes and, last January, more than one million Californians were licensed to use marijuana for medical purposes. According to BDS Analytics, the size of the legal marijuana market could overshadow $ 5 billion next year.

The California market could overshadow the estimated business figure of recreational marijuana in Canada next year. Canada became the first G7 country to open a domestic leisure market this month and, according to Deloitte, sales in this sector could exceed Can $ 4 billion in 2019.

California and Canada, however, only mention the global market opportunities associated with marijuana. Constellation Brands (NYSE: STZ), a leading beer, wine and liquor company, paid $ 4 billion for a 38% stake in Cover growth (NYSE: CGC) earlier this year. According to his management, the retail market for marijuana and cannabis products could exceed $ 200 billion in 15 years.

What this means for investors

Unfortunately, most marijuana stocks in the United States are traded in the slightly regulated OTC or penny stock market, and it is unlikely to change until Washington has legalized it domestically. Until then, investors must be willing to take the risk of acquiring OTC shares or buying Canadian marijuana companies.

Until recently, investing in Canadian cannabis companies involved buying them on the Toronto Stock Exchange or buying American Depository Receipts (ADRs). ADRs are shares representing a specified number of shares of a foreign company trading over the counter.

Given that many investors, including institutional investors, do not buy OTC shares, Canadian companies are increasingly moving from the OTC to the Nasdaq and the US. the New York stock exchange. Cronos Group (NASDAQ: CRON) and Canopy Growth sold their shares to Nasdaq and the New York Stock Exchange, respectively, earlier this year. Aurora Cannabis (NASDAQOTH: ACBFF) is scheduled to start trading on the NYSE next week, and Aphria Inc. (NASDAQOTH: APHQF) posted to the list on the NYSE this week.

Buying shares in Canadian marijuana shares will not expose you to the US market. They all decided to give up the American market until it was legalized by the federal government. Investors will have to look to the OTC market to take advantage of sales growth in countries like Colorado and Canada. Although many OTC actions are risky, there is a need to consider KushCo Holdings (NASDAQOTH: KSHB), a marijuana supply business.

KushCo markets marijuana packaging and other ancillary supplies in the United States, Canada and elsewhere. Packaging being highly regulated, this company has carved an important place. Last quarter, sales jumped 173% over the previous year to $ 12.9 million, but due to higher expenses, the group posted a net loss of $ 2.17 million. during the period. The company's $ 400 million market capitalization means that traditional valuation metrics are not cheap, but it can remain at the leading edge of its market and its sales in California, Canada, Colorado and elsewhere continue to climb up long-term growth portfolios.