Cannabis has become the most hated sector on the market. Aurora Cannabis (NYSE:ACB) stock got razed to obscenely low prices. Sector exchange-traded funds like the Horizons Medical Marijuana Life Sciences Index ETF (OTCMKTS:HMLSF), the Advisor Shares Pure Cannabis ETF (NYSEARCA:YOLO) and the ETFMG Alternative Harvest ETF (NYSEARCA:MJ) have been destroyed in recent weeks.
This pain all comes as the sector suffers under the weight of poor earnings, cash crunches and the vaping crisis.
Former Vice President Joe Biden just said he won’t support cannabis legalization because he believes it’s a gateway drug. Producers are burning through cash to expand. Sales growth has so far been disappointing. Supply issues have been damaging, as well.
It’s no surprise that Aurora stock investors are starting to give up on the cannabis story.
If you can stomach the volatility that’ll persist for some time, stocks like Aurora Cannabis are well worth buying on pullbacks. As InvestorPlace contributor Brad Moon pointed out, Aurora CEO Terry Booth believes there’s plenty of opportunity ahead: “Despite short term distribution and regulatory headwinds in Canada that have temporarily impacted the industry, the long-term opportunity for Aurora in the global cannabis and cannabinoids market is immense.”
There Are Big Catalysts Ahead for Cannabis
Cannabis stocks haven’t had a great 2019. But that may change in 2020.
For one, the House Judiciary Committee just advanced the Marijuana Opportunity Reinvestment and Expungement Act (More Act).
“Our marijuana laws disproportionately harm individuals and communities of color, leading to convictions that damage job prospects, access to housing, and the ability to vote.” Committee Chairman Jerrold Nadler said, as quoted by MarketWatch. “Recognizing this, many states have legalized marijuana. It’s now time for us to remove the criminal prohibitions against marijuana at the federal level,” he added.
Should it now pass other committee votes in the House, the MORE Act will make its way to the U.S. Senate. That’s just one substantial catalyst for cannabis investors.
Also, consider tha the Marijuana Business Factbook estimates the industry could be worth $77 billion by 2022. Analysts at Arcview Market Research and BDS Analytics foresee worldwide sales surpassing $55 billion by 2024.
And up to 67% of Americans support total cannabis legalization, up from 62% in 2018, according to a new Pew Research Center survey. The number of U.S. adults who oppose legalization also fell from 52% in 2020 to 32% as of November 2019.
Finally, as the race for the White House heats up, candidates are talking about cannabis.
Over the last few months, “Sen. Elizabeth Warren has co-sponsored a bill with Republican Sen. Cory Gardner to protect state legalization efforts and has said on the campaign trail that she favors legalization at the federal level … Sen. Kamala Harris favors nationwide legalization as well.”
And as MarketWatch points out, “Even Sen. Even Sen. Cory Booker introduced the Marijuana Justice Bill in the U.S. Senate, which would legalize marijuana, expunge criminal records of nonviolent marijuana convictions and creates a ‘community reinvestment fund.'”
While the short-term story stinks to high heaven, the long-term story is still intact.
The Bottom Line on Aurora Stock
The short-term noise in the cannabis industry may not go away any time soon.
However, the long-term growth trajectory of this industry is well off the charts with Aurora Cannabis a likely beneficiary. The company remains a top cannabis producer in Canada and it should be able to keep in-line with market demands in the years ahead.
As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.