The current cannabis trends affecting the market are likely to continue to impact the sector in 2024. First, the legal environment appears to be becoming more friendly to the drug. Many U.S. states are legalizing cannabis, the DEA is considering radically changing its cannabis approach and Congress is making moves to help the sector. Meanwhile, the consumer sector is becoming more favorable to cannabis, and many cannabis stocks are actually very cheap.
With all of that said, here’s more information about these trends that are affecting cannabis stocks and will continue doing so into 2024.
A More Friendly Legal Environment
In August, Minnesota legalized recreational marijuana, following closely in the footsteps of Maryland which took the plunge in July.
Among the states that could legalize recreational weed next year are Florida, Ohio, Tennessee and Nebraska. Florida’s high number of transplants from the liberal Northeast and its large elderly population could create a high profit opportunity for cannabis companies.
Meanwhile, positive developments for cannabis continue to occur in Congress. The Senate Banking Committee approved a bipartisan marijuana banking bill that would enable cannabis companies to obtain loans for the first time. The bill, if signed into law, would likely greatly accelerate the sector’s growth. Bipartisan backing and the support of Chuck Schumer give this bill a good chance of becoming a law in 2024.
Finally, the U.S. Department of Health and Human Services recommended that the DEA reclassify cannabis to reduce its federal classification. Currently, cannabis is listed by the DEA as a Schedule I drug. The agency views it as having a “high abuse risk” and “NO safe, accepted medical use in the United States.” On the other hand, Schedule 3 drugs are viewed as having much less abuse risk and accepted medical uses.
The Congressional Research Service believes that the DEA will follow HHS’ recommendation. CRS believes that this change would make medical marijuana legal in Washington’s eyes, although some dispute that conclusion. This change would enable tax deductions for marijuana producers and retailers, which would definitely boost cannabis stocks.
Positive Consumer Trends
Nearly 13 million Americans 50 and above utilized marijuana over a 12-month period. In 2018, the Journal of the American Medical Association reported a 25% surge in cannabis usage over a three-year period among older Americans. Given the increased acceptance and legalization of cannabis in recent years, those numbers have likely grown.
Meanwhile, according to Food and Wine, the popularity of cannabis-infused cocktails is expanding. There’s no doubt that drinking cocktails is definitely much more socially acceptable in our society than smoking. Consequently, I believe that cannabis-infused drinks could lead to greater success for cannabis companies than marketing the weed itself. What’s more, the cannabis cocktail trend could accelerate significantly next year. Companies have only recently learned that cannabis beverages are an appealing way for many consumers to imbibe.
Many Cannabis Stocks Have Very Low Valuations
Long gone are the days when the valuations of most cannabis stocks were as high as the sector’s most loyal customers. Now the valuations of many names in the space are actually quite low.
For example, one of my favorite names in the space, Tilray Brands (NASDAQ:TLRY), has a very low forward price-sales ratio of 1.4, while another one of my top picks, Aurora Cannabis (NASDAQ:ACB), has a tiny forward price-sales ratio of less than one.
As of this writing, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
