Cannabis Producers Could Be Chasing Global Market Worth $194 Billion In Seven Years: BMO Report

Article by Vanmala Subramaniam, Financial Post

Cannabis producers could be chasing global market worth $194 billion in seven years: BMO report High valuations justifiable if investors factor in potential of U.S. legalization on a federal level and legalization in the EU BMO's cannabis sector analysts “believe current valuations for Canadian LPs are elevated when only the Canadian cannabis opportunity is considered.”Bloomberg

The potential of the global cannabis industry is so vast that it could eventually make the sky-high valuations of some Canadian licensed producers look like bargains, according to a new report from Bank of Montreal.

In the report, the bank’s cannabis sector analysts, Tamy Chen and Peter Sklar, sought to determine just how big the total addressable market Canadian producers will be competing for in the coming years, one that doesn’t stop at Canada’s borders.

Assuming a blue-sky scenario in which the U.S. and all 28 countries in the EU legalize marijuana for both recreational and medical use — and in which Latin America allows the medical use of cannabis — they project that in seven years the market could reach $194 billion, a number that significantly dwarfs the $5.9 billion in potential revenue they anticipate will be generated by the Canadian medical and recreational markets.

Currently, the biggest three licensed producers in Canada — Canopy Growth Corp., Tilray and Aurora Cannabis — have a combined market capitalization of more than $30 billion.

Cannabis stocks have taken a hit in the weeks since Canada legalized recreational weed, as investors have seemingly reassessed the sector given serious product shortages, supply chain hiccups and a sense that it will take longer than expected to reach full capacity.

Read the full article here.

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