During the last decade, the legal cannabis industry has evolved into a burgeoning global market that generated more than $37 billion of sales in 2021 (according to Prohibition Partners). The firm expects the legal global cannabis market to generate more than $100 billion of sale by 2026 and we continue to have a bullish long-term view on the sector.

Last year, the legalization of recreational cannabis in several new states in the US served as the most significant growth driver for the sector and this is a trend that we expect to continue in future years.

Although we continue to view the US as the most attractive cannabis market in the world, we are highly focused on international markets like Colombia, Germany, and Israel. We believe the international cannabis market (not including Canada) is barely in the first inning of a major growth cycle and will monitor how these markets advance in 2022 and beyond.

An Industry With Significant Visible Growth Catalysts

We believe the most significant catalyst for the global cannabis industry is related to legislative developments in Germany, Mexico, and the US. Many cannabis executives and analysts expected to see federal legalization or reform in the US but the process has been delayed and interrupted by the COVID pandemic and rising tensions between major global economies.

Later this year, we expect to see recreational cannabis legalize in Israel and Mexico which would be a major catalyst for the sector. So far this year, medical cannabis sales in Israel have significantly increased and this is a trend we are bullish on. Recreational cannabis legislation in Mexico has been delayed but has the support of the country’s president and we are highly focused on the few companies that are levered to it.

The reason for our bullish outlook in Germany is related to a change of leadership. The new leadership has a favorable view on cannabis and we expect to see recreational cannabis legalized in the European Union’s (EU) largest economy. When Germany legalizes recreational cannabis, we expect to see a domino type effect in other markets in the EU and consider this to be one of the most significant potential catalysts for the global industry.

The Evolution of the Sector has Impacted the Recent Selloff

One of the most interesting shifts we have identified over the last two years is related to how the US cannabis industry has outgrown the Canadian market. The Canadian cannabis market is a fraction of the size of the US and this has put considerable pressure on former industry leaders.

We attribute some of the recent weakness in the entire sector to the change in the balance of power from Canada to the US and are surprised by how this has also put considerable pressure on leading US operators.

At current levels, we believe that many companies are significantly undervalued and expect this trend to change as the global sector continues to grow. If recreational cannabis is legalized in Germany, Mexico or the US, we expect to see a change in sentiment toward the sector. We believe that any legislative advancement in the US would be a gamechanger for the entire cannabis sector and continue to have a bullish long-term outlook on the industry.

If you are interested in learning about the companies that are capitalizing on the changing landscape of the global cannabis industry, please send an email to support@technical420.com with the subject “Global Cannabis Leaders” to be added to our distribution list.

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Authored By

Michael Berger

Michael Berger is Managing Partner of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.