Could the Legal U.S. Cannabis Market Top $90 Billion?

It was big news when RBC Capital Markets praised Constellation Brands multi-billion investment in Canopy Growth and notified its clients that it expected the legal cannabis market in the United States to reach $47 billion in revenue within the next decade. Now, writing in Seeking Alpha, Jonathan Cooper makes the case that the U.S. cannabis industry will top $90 billion in a detailed piece:

When (or if) cannabis is legalized nationally in the United States, the market will be very large. I estimate that the market could amount to ~$90 billion in revenue in ten years, although that estimate is subject to a lot of factors that might increase or decrease that figure. This figure is also just the revenue from cannabis itself, and not revenue from by-product industries such as, e.g., vaporizers for consuming cannabis.

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But perhaps this enormous market explains why Constellation was willing to invest $4 billion into Canopy Growth – a company with trailing revenue only C$78 million. There may not be much revenue yet, but the potential market is enormous – potentially larger than spirits, wine, or cigarettes:

But as usual, cannabis companies are a risky investment. Please invest cautiously and using proper diversification – while I hold shares in Canopy Growth and Hydropothecary, they make up only ~8% of my portfolio.

Definitely read Cooper’s entire post if you are thinking about investing in cannabis stocks. He backs up his contention with a lot of statistics and makes assumptions based upon those statistics and current trends, but the cannabis industry is certainly still volatile, so I’m glad that he included a disclaimer about diversifying your portfolio. I don’t know if Cooper is exactly right, but I do suspect that RBC Capital’s $47 billion is a bit low, as most initial projections of legal cannabis revenue have been. When thinking about investing, you definitely need to do your homework and utilize safeguards, but there’s no doubt that the current trend for the legal cannabis industry is looking promising at the moment.

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