North American marijuana stocks started the year on fire. With many American states next to legalize and Canadian federal legalization on the horizon, 2018 could be an even bigger year.
If you were in California on New Years Day, it looked like several Apple Stores suddenly appeared. But in fact, these new stores were selling flower not less battery power. Cannabis enthusiasts in California formed lines at dispensaries that snaked around the block, as the excitement leading up to recreational use legalization finally culminated.
Now, it seems that excitement has carried over into North American marijuana stocks during the early days of 2017. One week before California’s legalization, a new marijuana ETF rolled out in the United States. ETFMG Alternative Harvest ETF was up 18% percent in just one week, but has experienced a tumble since the sessions announcement. Its Canadian counterpart, Horizons Life Sciences ETF was trading at below $19 CAD before New Year’s day. Since then trading has moved to over $22 CAD and has experienced a 20% gain.
Here is a snapshot of performance in 2017.
Marijuana Industry Report Pours Gas on Fire
While excitement was at its highest, a new marijuana industry report from ArcView Market Research turned up the heat with data. The report entitled, “US Legal Cannabis: Driving $40 Billion Economic Output,” made a few impactful insights clear.
The report stated,
“The legalization of adult-use sales in California will lead to the creation of nearly 99,000 cannabis industry jobs in the state by 2021, about a third of all cannabis jobs nationwide, and 146,000 jobs overall when indirect and induced effects are considered.”
Early mover states are positioned well to capitalize on opportunities and will account for the majority of sales.
“Six of the early movers in legal adult-use implementation (California, Colorado, Massachusetts, Nevada, Oregon, and Washington) will account for more than 60% of that $39.6 billion in 2021 total economic output. Medical-use states will see a far less positive economic impact, while the hold-out states will see none.”
Tax collection is also expected to increase.
Conservative estimates show more than $1 billion dollars in wholesale, excise, and cannabis-specific sales taxes were taken into state treasuries during 2016. That number is forecast to grow to just over $1.4 billion in 2017 and then to nearly $2.8 billion by 2021. With additional state and local general sales taxes, that 2021 figure could be between $4 billion and $4.7 billion.
**Full Disclosure: I own shares in Horizons Marijuana Life Sciences ETF (HMMJ) which has holdings in several Canadian cannabis companies mentioned in this article.**