The international finance community is growing increasingly accepting of the cannabis industry. For most of 2018, many investment banks and financial institutions regarded the legal marijuana market as somewhat of a “shady” industry, fueled by promises of skyrocketing cannabis profits as many more speculative investors jumped into these opportunities.
During the last quarter of 2018, however, the industry has undergone something of a trial by fire, as a turbulent market saw most companies see significant losses and with it, much of the excessive hype dialed down. Additionally, recent scandals regarding possible fraudulent acquisitions in the cannabis industry also served to make institutions skeptical of the industry.
Now in 2019, the perception of the cannabis market has been changing, and this has been reflected in the attitudes within the finance community. Today, one independent investment bank and research firm Seaport Global released a 208-page report serving as a primer for the marijuana industry. The report, which also provides initial appraisals of over a dozen cannabis companies, goes on to predict that the global cannabis market would reach a worth of $630 billion by 2040.
“We area formally launching coverage of the global cannabis space. This exciting market area is evolving quickly, with hundreds of public companies coming to market in recent years. There is clear momentum behind the legalization of cannabis around the world. We expect many countries, including the US, to go legal within the next handful of years, and we think that this will create a considerable forward opportunity for the burgeoning industry that is regulated legal cannabis,” said research analysts at Seaport Global, according to New Cannabis Ventures. “From a little over $12B in global value today, we see the market ultimately evolving to almost $630B in due time. We expect the market to largely bifurcate into (1) a retail dispensary model built around recreational use, and (2) CPG/pharma products offered for therapeutic use in traditional channels. Ultimately, we see the greatest potential for cannabis as a value-added ingredient.”
While an ambitious target, the $630 billion market estimate isn’t unreasonable considering past exponential growth rates. Seaport also stated that $94 billion of that would be in the U.S. market should the nation federally legalize recreational use.
At the same time, the investment bank predicts the American market will split between two types of cannabis businesses. First being a retail dispensary model that focuses on recreational cannabis and branding, while the second would be a pharmaceutical treatment model focusing more on building backend medical channels for the healthcare sector.
While the investment bank is extremely bullish on the sector as a whole, analysts within the company are less optimistic about some of the U.S.’s top cannabis companies. Canopy Growth Corp (TSE: WEED)(NYSE: CGC), Aurora Cannabis (TSE: ACB)(NYSE: ACB), and Tilray (NASDAQ: TLRY) are the only companies that Seaport gives a “neutral” outlook on. Instead, the companies that the investment bank has the highest opinion of include HEXO Corp (TSX: HEXO), Aphria Inc (TSX: APHA)(NYSE: APHA), Green Organic Dutchman (TSX: TGOD), and Acreage Holdings (CSE: ACRG).
The fact that more and more of these smaller institutions are jumping on the cannabis industry is a good sign for the market as a whole.