A Fresh Perspective on Cannabis Stocks: Could A Comeback Be on The Horizon?

In the ever-volatile financial market, there’s always a sector that catches the spotlight. Recently, it has been the cannabis stocks, and it seems there’s more to their story than meets the eye. After a tumultuous rollercoaster ride, it appears we may be witnessing early signs of a potential resurgence.

We’ve seen the fluctuations. ACB is down by 0.34%, CGC is reeling at a whopping -11.38%, while CRON saw a minor rise by 2.60%. Then there’s TLRY, which dipped by -3.11%, GRWG growing at 1.80%, and YOLO advancing by 0.78%. It’s clear as day – cannabis stocks have been weathering a storm since 2020.

The downswing began after the impressive sprint of 2020 and early 2021, driven largely by anticipations of widespread legalization as Democrats ascended to power in the U.S. However, instead of the forecasted growth, cannabis stocks were met with a catastrophic downturn.

Initially perceived as a mere market correction following the steep hike, the decline stretched on far longer than anticipated. Factors such as a slowdown in the progress of federal legalization, rising inflation, increasing central bank rates, and an oversupply situation leading to nose-diving prices cast a shadow over the cannabis industry throughout 2022.

A glance at the past provides more clarity. In the year 2000, the Department of Justice reported that a pound of marijuana was valued at $6,000 on average. Now, the narrative has changed dramatically. With an influx of new cultivators, the market is grappling with an oversupply scenario, resulting in cultivators earning a mere $1,000 per pound of their produce.

In such an environment, marked by falling prices and cut-throat competition, it’s increasingly challenging for cannabis companies to maintain healthy margins, particularly amidst an inflationary macroeconomic backdrop. The significant plunge in cannabis stock prices can largely be linked to the struggle to offset cultivation costs.

So, does the future hold a rebound for cannabis stocks? Taking the ETF AdvisorShares Pure Cannabis (NYSE:YOLO) as an example, it has plunged over 92% from its peak of $31.87 in February 2021 to a low of $2.53 just this week.

However, it’s important to remember that even the steepest descents can often lead to a climb. While the downturn has been daunting, analysts are now spotting signs of bears losing their stronghold, predicting robust growth for cannabis stocks in the next 12 months.

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https://www.investing.com/analysis/pro-research-of-the-week-are-cannabis-stocks-ready-to-go-higher-again-200639555