2020 Cannabis Sector Outlook

2019 was a tough year for cannabis stocks. However, I see a big opportunity setting up in 2020.

Let’s take a look at 2019 to understand why the recent pullback has created great promise for investors in the new year.

The cannabis stock fund Alternative Harvest (MJ) fell 60% from the 52-week high.

I See Three Reasons Cannabis Stocks Fell in 2019

#1 – Canada Is Off to a Slow Start

Canada’s legal cannabis market got off to a slow start. High taxes and over-regulation has made it difficult for the legal market to compete with the illegal market.

#2 – California Is Off to a Slow Start

California’s legal cannabis market is also off to a slow start. High taxes and over-regulation are also making it difficult for the legal market to compete with the illegal market.

#3 – The Vape Crisis

Illegal vape products bought in the illegal market led to thousands of people getting sick. It sent a huge scare through the cannabis industry and cannabis stocks.

Expectations were running red hot as we went into 2019. This string of bad news showed that expectations got way ahead of reality and it led to a repricing of the entire cannabis sector.

However, while 2019 was a struggle, I believe this has created an exceptional opportunity heading into 2020.

Many of the most promising cannabis stocks are deeply oversold and trading at multi-year lows. In the meantime, I see a series of powerful catalysts unfolding in 2020.

5 Major Catalysts for Cannabis Stocks in 2020

Bad News is Now Priced Into the Sector

A lot of bad news has been priced into the cannabis sector. Now that expectations have been cut down, any good news will have a bigger impact. And I see a lot of good news on the horizon.

Canada is Gaining Momentum

Canada is working hard to fix the issues plaguing the legal cannabis industry and that is setting the stage for solid revenue growth in the next few years. That includes Canada 2.0, legalizing cannabis extracts such as vapes and edibles. These products should hit the shelves in early January and should double the size of the Canadian market.

Canada is also looking to sharply ramp permits for new dispensaries that would increase industry revenue.

More US States are Going Legal

2020 should be a huge year for the US cannabis industry. Nine states are looking to legalize, with six of those looking to legalize recreational. That includes both New York and New Jersey – together could equal one of the largest cannabis markets in the US.

The MORE Act Could Legalize Cannabis in the US

The US is the largest cannabis market in the world by a long shot – and the US is closer than ever to passing legislation that would essentially legalize at the federal level. Last week, the House voted to pass the MORE Act. This bill would prevent the federal government from intervening in state cannabis markets, essentially achieving federal legalization. I expect to see a lot of progress on the MORE Act and other cannabis-friendly bills in Congress that would stimulate the US cannabis industry.

2020 US Presidential Election

The US cannabis industry has been getting a lot of publicity from the 2020 US presidential election because all of the Democrat candidates support various forms of decriminalization and legalization. I believe cannabis will continue getting a lot of attention. This should give the industry a lot more credibility and get a lot more mainstream investors interested in buying shares.

2020 is Setting up to be a Great Year for the Cannabis Sector

2019 was a tough year for the cannabis sector. However, the steep decline in the sector has created a unique opportunity.

The cannabis sector is currently trading more than 50% below the 52-week high. Many of the most promising stocks are trading at multi-year lows.

In the meantime, I see a series of powerful industry catalysts directly on the horizon.

About the Author

Michael Vodicka is an equity analyst with more than 20 years of experience trading and investing. His research has been featured in some of the industry’s most respected publications. He has been investing and leading investors in the cannabis sector since 2013.