Increased Investments in the Cannabis Industry as a Result of COVID-19 Expected Going Into 2021

By Stephen Ryan, Chief Marketing Officer of Infinite CBD

Since the beginning of the COVID-19 pandemic, we have seen how industries and their processes have turned upside down. In a year that was set to speed up the regulation of cannabis usage across the country, the industry has faced massive disruption, which paves a bright future for investments.

The future of investing in the cannabis industry will be a bright one. As the industry takes the media by storm, it is still relatively young and has a long way to grow. While investors watch and wait for potential federal marijuana legalization in the U.S., most cannabis companies are investing aggressively in growing their businesses and securing high-profile partnerships.

Risk Assessment and Cannabis Investments

As cannabis becomes more mainstream, investors are still sampling the industry as volatility and uncertainty reign. As cannabis’ recreational use increases, so has the discussion surrounding interest in cannabis stocks and how safe they are amongst retail investors. As these conversations increase, there will be more research, innovation and changes in law that would allow the cannabis industry to become even more legitimized and continue to grow.

After the SAFE Banking Act - a proposed bill regarding disposition of funds gained through the cannabis industry in the U.S. – passed in 2019, there has been more opportunity in the industry. However, there is a fine line between regulating the industry in a way that encourages it to continue its expansive growth, and holding the industry back with over-regulation.

Now, following COVID-19, a coronavirus relief bill includes marijuana banking protections, which can potentially protect financial institutions that service state-legal marijuana businesses from being penalized by federal regulators increasing interest in investing in the industry.

The Pandemic as it Relates to Cannabis Industry Disruption

Purchasing behavior amongst consumers involving marijuana have changed noticeably over the past several months as a result of the pandemic. At the beginning, we saw a roller coaster of activity. Marijuana Business Daily found that after the state lockdowns and shelter-in-place orders were put in place, recreational sales dropped almost 50% in late March, and picked back up after the federal stimulus checks began being distributed in April. The study also found that marijuana shoppers are spending more money per visit to recreational retail outlets. But they are shopping less often, which can be attributed to safety concerns.

Many are wondering how these unusual times result in increased investment for cannabis companies. But, unsurprisingly, COVID-19 seems to have brought an increase in cannabis sales. As people are home more often they may find themselves with a lot more time on their hands. In the short term, a level of uncertainty will remain, but as medical and recreational cannabis continue to be legalized state by state, maybe even at a federal level, the returns from investments will continue to grow long term.

Companies across the cannabis sector all experienced a similar trend at the beginning of COVID, a drop in sales in March which picked back up in April. Since then companies have seen pretty consistent numbers month to month with small amounts of growth. We can certainly still see and feel the uncertainty of customers and the industry as a whole as purchasing patterns continue to change.

Looking Ahead

In 2019, Investopedia explored the rise of cannabis stocks among the average investor to find out if they were actually interested in buying these stocks. The outlet polled their daily newsletter readers, and discovered that 60% of respondents are actively invested in the cannabis sector, while 40% are not at all.

Looking ahead, it’s safe to say that after the effects of COVID-19 wear off, we can expect the next decade to bring a lot of movement in cannabis investments. Investors might shift their focus from short-term gains and approach cannabis investing as a longer-term project.

Depending on political climates, there may be opportunities within the cannabis sector. Whatever the case may be, the cost/performance value of the cannabis industry and its products will continue to be vital for investments across the industry -- through COVID-19 and beyond.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.