Unless you've been living under a rock for the last three months, you are well aware of the impact the deadly coronavirus is having on the entire world and industries across the board. But, how exactly is the coronavirus impacting the US cannabis market?
If you thought it couldn't get any worse for the cannabis industry, which has been plagued with endless problems over the last year, lo and behold a global pandemic that's hindering everything from sales to legalization efforts.
Let's take a look at how the coronavirus is impacting the US cannabis market and what investors might expect moving forward.
US Cannabis Market Sees Decline in Sales
One of the most immediate impacts the coronavirus has had on the US cannabis market is its sales. The Centers for Disease Control and Prevention (CDC) recommends that people taking medication have at least one month's supply of their medication in the event of a supply strain or lockdown order.
The coronavirus has sparked buying sprees in legal cities like Seattle for items like toilet paper and other household essentials, and many have also stocked up on their supply of cannabis.
Those who didn't stock up in the Seattle area will likely turn to online options to purchase their cannabis after King County, which contains Seattle, issued a work-from-home order for its 2.2 million residents last week.
Luckily, cannabis retailers are reacting to the slowdown in foot traffic by offering discounts on online products.
For investors who are still hopeful that the US cannabis market will make a comeback, pot stocks that operate within the digital world might be the best option at this time.
One of these is e-commerce giant Shopify Inc. (NYSE:SHOP), which first dipped its toe in the cannabis e-commerce space in July 2018 when it signed a partnership with former pot giant Aurora Cannabis (TSX:ACB) (NYSE:ACB). Once legalization rolled in, several cannabis companies looked to Shopify as their online store platform of choice, and the company was officially labeled a pot stock.
Cannabis Events Being Canceled or Postponed
Another sector of the US cannabis market that is being impacted by the coronavirus is tourism. Indeed, cannabis-related conferences and events across the nation have been postponed or canceled to help prevent the spread of COVID-19.
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California, which is the largest US cannabis market, has postponed the California Cannabis Industry Association’s annual policy conference, which was scheduled for March 18, along with the High Times Cannabis Cup Central Valley and the annual Hall of Flowers show, both of which are scheduled for April.
Other events that have been postponed due to coronavirus fears include Florida's 420 Broward Festival, Colorado's NoCo Hemp Expo, and Boston's Conversations in Cannabis, the New England Cannabis Convention (NE Cann) Boston. Meanwhile, Maryland's Baltimore Cannabis Relief Festival and the SXSW in Texas have been canceled.
US Cannabis Market Funds
Financing is another major issue that will likely impact the US cannabis market amid coronavirus concerns. Cannabis companies already have a hard enough time raising much-needed capital these days, as investors distance themselves from the volatile market.
Now that the global economy is expected to take a major hit thanks to COVID-19, investments into the US cannabis market will likely dry up even more.
One company that has money in the bank and is raking in some revenue is Green Thumb Industries Inc (CSE:GTII) (OTCQX:GTBIF). In November 2019, GTI reported a 292% year-over-year increase in revenue for the third quarter. The company brought in US$68 million and reported an adjusted operating EBITDA of US$14.1 million.
Green Thumb also reported US$123.8 million in assets, which includes $66.1 million in cash and cash equivalents.
Green Thumb hasn't been immune to market declines and has seen its stock price drop 53.42% since the beginning of 2020. Of course, once the market corrects itself and the bad seeds get weeded out, the company's share price could rebound.
State Legalization Efforts
At present, there are 11 states in the US cannabis market that allow recreational cannabis use. However, the upcoming election in November could see other US states join the cannabis movement.
Unless the coronavirus gets in the way.
New York Governor Andrew Cuomo's marijuana tour plans for 2020 could be halted because of the virus. The governor made plans to visit legalized states to boost his understanding of the legal US cannabis market and help him draft up his proposal.
If the coronavirus delays Cuomo's cannabis tour too much, it could also delay the finalization of the cannabis reform in New York.
Takeaway
Like virtually every other industry across the globe, the US cannabis market is being negatively impacted by the coronavirus, which has clocked in over 100,000 cases in 70 countries in the last three months.
However, the pot industry was on a seemingly endless downward spiral well before COVID-19 appeared. Just look at the state of Aurora Cannabis and Canopy Growth Corp. (TSX:WEED) (NYSE:CGC), which were once the world's largest cannabis companies.
The US cannabis market has seen several of its top pot stocks decline sharply. In fact, Cresto Labs (CSE:CL) (OTCQX:CRLBF), MedMed Enterprises (CSE:MMEN) (OTCQX:MMNFF), Acreage Holdings (OTCQX:ACRGF), Charlotte's Web (TSX:CWEB) (OTCQX:CWBHF), and Harvest Health and Recreation (CSE:HARV) (OTCQX:HRVSF) have all departed from the $1-billion club.
Of course, the US market could eventually level out and see some companies within the space make a major comeback. It's just unlikely that will happen until after the coronavirus chaos dies down.
Featured Image: DepositPhotos © Omstudio
