Cannabis Stock Prices Plummet. What This Could Mean For Medical Marijuana

Learn more about the tapering marijuana stock prices and what that could mean for medical marijuana.

Just last year, many forecasters predicted that cannabis stocks would take off in 2019. The reality is that cannabis stocks are down. And some forecast that these stocks will not recover.

Why have cannabis stocks plummeted? It all has to do with investors; when more investors sell stocks than buy stocks, the value of that stock decreases. And over this past year, many investors have opted to sell their cannabis stocks.

Not every cannabis stock is down, but many are. The most impacted are stocks for large companies like Tilray and Cronos Group.

One reason why these stocks have fallen dramatically is that cannabis companies were overvalued. Take Tilray, for instance. According to a recent Forbes article, their 2018 revenue was at $200 million, yet their valuation hit a peak of $20 billion. That’s a pretty significant skew.

Compare this to American Airlines. Last year they were also valued at $20 billion, during which time they brought in $45 billion. That is 225 times the revenue with the same valuation.

So, why is it that the value of these cannabis companies didn’t keep us with what was projected?

Both investors and business owners appear to have had unrealistic expectations. With more states and Canada opening up their markets to marijuana, there was a lot of excitement surrounding the cannabis market’s potential.

However, many companies flooded the marketplace. The companies had to compete with one another for the available business. Competition leads to decreased prices and less profit for companies. Combine that with scares like black market vape pen illnesses, and many investors decided to get out.

What could the fall in cannabis stocks mean for

medical marijuana patients?

The black market vape pen illnesses are said to be a contributor to the tapering of cannabis stock.

Understand that a fall in cannabis stocks does not mean that people are spending less money on cannabis. Or that more money will not be spent on cannabis over the next few years.

Thanks to increased legality, there is likely going to be more money spent on cannabis next year than this year.

And as marijuana availability continues to rise, there will be more competition between cannabis businesses. The result? A likely decrease in the cost to purchase marijuana.

Take Oregon. Oregon was one of the first states to legalize recreational marijuana. From 2015 to 2019, marijuana prices were reduced by half. Why? There were a lot of retailers and cultivators competing for a small pool of customers. Businesses had to stay competitive, so they cut prices.

So, while this drop in stock prices does signal that the marijuana stock bubble may have burst, consumers may benefit in the long-run.

This is music to the ears of medical marijuana patients in Arkansas. With so few marijuana cultivators and dispensaries, cannabis prices are some of the highest in the country. Over time, the cost is likely to fall.

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