By Ciara Linnane, MarketWatch
Cannabis stocks fell Tuesday, tracking weakness in the broader market where excitement about a U.S.-China trade truce had dissipated on concerns about how quickly a deal can be achieved.
The major indexes were lower, a day after the S&P 500 notched its sixth record of the year. Investors are waiting for key jobs data due Friday to provide direction and are holding back ahead of Thursday’s July 4 holiday.
The ETFMG Alternative Harvest exchange-traded fund /zigman2/quotes/204332491/composite MJ -0.21% was down 0.9%, with 23 of its 38 constituent stocks falling. The Horizons Marijuana Life Sciences ETF /zigman2/quotes/208856346/delayed CA:HMMJ +0.63% was up 0.3%, with 33 of its 54 components declining.
Korey Bauer, portfolio manager of the Cannabis Growth mutual fund /zigman2/quotes/208282024/realtime CANNX 0.00% launched by Foothill Capital Management, said volumes in many of the names he tracks were lighter.
“The holiday week is causing a slowdown for sure (we) expect volumes to dry up even more as the week goes on,” he said.
In regulatory news, New Jersey said it would issue up to 24 new medical cannabis permits, falling far short of the 108 licenses it announced in early June, as Marijuana Business Daily reported. The number includes four vertically integrated licenses. The news is expected to disappoint some of the smaller companies that were unable to attain licenses in the last round, which proved highly competitive.
New Mexico is barring nonresidents from buying medical cannabis, according to media reports. New Mexico has been threatened with a suit by one of its bigger players, Ultra Health, according to the Albuquerque Journal.
In Maine, adult-use sales are expected to start next spring, nearly 3½ years after they was approved by voters. The state’s laws will be some of the strictest in the country and will not allow nonresidents to purchase cannabis, according to cannabis news site merryjane.com.
From Ireland comes the news that a limited five-year medical cannabis program has been signed into law by Simon Harris, minister for health. The program will allow cannabis to be consumed by patients suffering from multiple sclerosis, nausea related to chemotherapy and severe cases of epilepsy, according to the Irish Times.
Stifel analysts published a report on the cannabis sector on Tuesday that said they expect it to become a $200 billion global opportunity in the next decade, up from the roughly $8 billion that was generated in 2018 in legal markets and U.S. state licensed sales.
Market leader Canopy Growth Corp. /zigman2/quotes/200603886/composite CGC +0.72% /zigman2/quotes/202205609/delayed CA:WEED +1.51% disappointed investors with weaker-than-expected earnings last week and mixed outlook, as elevated costs during the current investment phase lowered gross margin forecasts, but Stifel is still a fan, said the report.
“While the near-term execution at Canopy is underwhelming likely driving a portion of the elevated expenses, we remain confident that Canopy is best positioned to tackle all avenues for growth in the $200 billion global category,” the analysts led by Andrew Carter wrote in the report.
In the same vein, Canada currently represents the most significant near-term opportunity, as the only G-7 country to have fully legalized cannabis last October. Stifel is expecting Canada to achieve C$10 billion ($7.6 billion) in annual sales by 2023.
“The market is quickly taking shape with the latest update from Stats Canada suggesting a C$900 million annualized market in April with sales in the month up 23% sequentially likely driven by the cannabis enthusiast holiday 4/20 and initial store openings in Ontario,” said the report. But Canada sales will be eclipsed by the U.S. which offers a $100 billion opportunity over the next decade, the analysts wrote. That opportunity will change if federal rules are relaxed, which Stifel is expecting is at best a 2021 possibility.