Canada’s main marijuana producers are patiently waiting for national legalization and what’s in store for their revenue and stock prices. Current marijuana stock valuations suggest great potential with Canopy Growth Corporation as the largest marijuana stock in terms of its market cap of $2 billion and other companies not too far. Numerous endeavors have been completed to calculate the market size once legalization is achieved and one of the most recent attempts has investors attention.
Canada’s Parliamentary Budget Officer (PBO) is responsible for estimating the financial costs of proposed legislation. A report released last year by the PBO described financials regarding the legalization of marijuana. The PBO concentrated on valuing consumption and then predicted prices to forecast the market size. The analysis led to the PBO estimating the value of the Canadian marijuana market to be between $4.2 billion and $6.2 billion in 2018.
With Canada moving towards recreational legalization in 2018 the PBO estimates marijuana usage to rise to 734 million metric tons by 2021 from about 635 million metric tons in 2018. With that being said, the marijuana market should be around $7 billion within four years which is consistent with the government’s Task Force on Cannabis Legalization and Regulation estimation of the illegal recreational-marijuana market.
A new estimate of the up and coming marijuana market has emerged and it’s higher than previous estimates. Analyst Colin Firth joined Oraclepoll Research to find the most recent potential of the market. Five thousand Canadians were asked 75 detailed questions about marijuana use. The survey suggested that the number of marijuana users will be closer to 11 million in 2021 rather than the 5.2 million previously reported. This change brings the market closer to a valuation of between $8 billion and $12 billion annually, double what has previously been predicted.
What does this mean for Canadian marijuana stocks? It is possible that the high valuations for the companies in this rapidly growing industry are not farfetched at all.