The cannabis market has been projected to reach a revenue of $60.79 in 2024. Even with this projection, work needs to be done in the marijuana investment space, particularly in the area regulations. In the upcoming year, market analysts predict new trends that will positively affect the sector.
These are the main cannabis stock trends that investors should be aware of in 2024.
Legal Landscape and Market Expansion
The legal situation in the United States is a significant factor that is set to shape the cannabis market and affect the performance of pot stocks. This year, there are indications that the legal framework will become more accommodating for cannabis investors and companies in the US, which will then spread to the global market.
For instance, many American states have created legal frameworks for the production and consumption of marijuana for medicinal or non-medicinal purposes. These include states like Arizona, Colorado, Massachusetts, and Washington. More recently, states like Minnesota and Maryland have also legalized recreational marijuana consumption.
Though the U.S. federal laws consider marijuana illegal for whatever purposes, the legalization moves from individual American states have resulted in considerations among various quarters to make the plant legal.
Additionally, Congress is suggesting laws to support the industry. The United States Drug Enforcement Administration (DEA) plans to revise its stance on marijuana. These changes will affect the cultivation and usage of cannabis in the U.S.
These favorable trends indicate a potential reclassification of cannabis at the federal level. The federal cannabis offense pardons by President Biden’s administration further supports the suggestion that friendlier laws to regulate the plant.
The general marijuana market is optimistic that a completely legalized operational landscape for cannabis companies and consumers will significantly transform the industry and expand the overall marijuana market. Due to the anticipated cannabis legalization impact, investors have a potentially stabilized market to consider as we head into the new year.
Consumer Behavior and Product Innovation
Investment in cannabis also requires a thorough understanding of consumer trends. The cannabis industry trends are determined by supply and demand. So, a shift in consumer behavior will directly impact the entire marijuana market come 2024.
For instance, an increase in the number of seniors or older demographics using cannabis for medicinal purposes via various cannabis-infused products could lead to more innovations.
Currently, medically-inclined marijuana-focused businesses offer diverse products and services using cannabinoids and other marijuana-related extracts. These biotech products are reportedly efficient in treating or providing relief to people with different diseases, including cancer, epilepsy, and Alzheimer’s disease.
As more businesses strive to cater to the unique consumer class, there’ll be an increase in product developments and an expansion of the available market opportunities that investors can leverage. The switch can boost investors’ interest in the biotechnology companies at the forefront of such innovations and their psychedelic stocks.
On the other hand, product innovation can come from an increase in the recreational use of marijuana among consumers. As more states create friendlier environments for recreational marijuana consumers to exist legally, the industry will experience a shift in consumer behavior, as demand increases and cannabis-focused companies develop innovative products to supply the teeming consumers.
Valuation and Investment Opportunities
Another way to determine the best cannabis stocks in 2024 is to assess the current and future cannabis market valuation. According to recent data from Fortune Business Insights, the entire cannabis industry was worth $43.72 billion in 2022 and its valuation is projected to rise to $57.18 billion in 2023 and ultimately reach $444.34 billion in 2030.
Bringing it down to the US cannabis market, Yahoo Finance states that the US marijuana industry was valued at $15 billion in 2022, and market analysts believe the sector will reach around $50.91 billion by 2032. In other words, the American marijuana market is the fastest-growing market with various opportunities for investors.
The optimistic market predictions will impact the valuation of major players in the industry, including companies cultivating and distributing marijuana goods and services. As these businesses get more valuable, their stock prices will also improve, offering investors more gains. The potential profits that accompany stronger company valuations and their stocks will result in more interest in marijuana shares from retail investors.
At the same time, more institutional investors will key into the possibilities of these stocks. This interest will significantly grow if the American government decriminalizes cannabis use and consumption, as the change would apply to both medical and recreational purposes.
Furthermore, companies with low price-to-sales ratios might attract investors’ attention. You might wonder why this would be appealing. This is because investors are naturally more drawn to accessible and affordable stocks.
Legislative Hurdles and Financial Implications
The global and American cannabis industries hold significant potential for future growth. However, the path to expansion is seen as complex by industry experts. Numerous challenges could hinder the development of the cannabis industry, and this is particularly true in the United States.
First, the industry needs to navigate the legal challenges currently plaguing it. Cannabis remains illegal in some U.S. states, including Iowa, Kansas, and Kentucky. The federal law in the U.S. also prohibits cannabis cultivation and production. These legislative hurdles are significant, and the industry must overcome them to achieve its projected valuation.
The financial situation for cannabis businesses is tough. The SAFE Banking Act was meant to help with cannabis banking but has not passed the Senate after three tries. Because of this, banks and other financial institutions see the industry as high-risk, and are not willing to fund owners and operators of marijuana-related businesses.
Without this act, cannabis businesses find it difficult to obtain legal financial support from traditional banks. These businesses need this support to achieve their goals and advance their companies. There are no signs that the SAFE Banking Act will be passed into law soon, and pot shop owners expect the financial situation to continue this year. Therefore, potential investors may hesitate to add cannabis stocks 2024 to their portfolios due to these challenges.
Mergers, Acquisitions, and Market Consolidations
In the cannabis industry this year, we might see trends similar to those in traditional businesses, such as market consolidation. Many companies in the marijuana sector are facing challenging market conditions. They have to deal with legislative challenges and find getting loans from regular banks hard.
Many cannabis companies will struggle to stay afloat if their stocks are not in high demand. So, we may see many companies looking for alternative survival options like mergers and acquisitions. On average, this will affect small and middle-scale enterprises, as they are more likely to struggle financially.
Companies with marijuana as their only source of revenue will also have challenges standing the test of time, especially if the industry fails to reach its projected potential. So, the big sharks can swallow the small ones in their quest for market dominance, better efficiency, and overall competitive advantage.
Ultimately, it’s expected that the market consolidations will cause a shift in the overall market structure, as many small companies will struggle to stand alone, which can impact investors’ sentiment.
My Final Thoughts
Investing in cannabis this year could be profitable, but they need to understand market trends to actually profit from it. Aside from market trends, investors should also watch for events that positively impact the marijuana industry. In this comprehensive guide, you will notice that we have discussed the major trends for the American and global cannabis markets.
Changes in the regulatory framework are crucial. In the U.S., decriminalizing cannabis at the federal level could be what would cause a shift in demand for cannabis stocks. Moreover, the growing popularity of cannabis-infused products can change consumer behavior as these products include medications, food, and other essentials. This change will increase social acceptance of cannabis.
Investors must also consider other factors vital for making informed investment decisions. These include valuation, market projections, and recent updates.