Cannabis edibles may help marijuana stocks in 2020

Cannabis edibles may bring some good news to the industry. In 2019, investors in the cannabis sector underwent tough trials. However, “Cannabis 2.0” in Canada is leaving investors optimistic about the market.

Much was said about “Cannabis 2.0” products, which include cannabis edibles and infused drinks. Cannabis edibles began to be sold to consumers in Canada’s largest province on Jan. 6 and will launch in other locations soon.

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Legalization of cannabis edibles aim to help the market grow

In total, 59 new products have been put on sale by the Ontario Cannabis Store, the official distributor of cannabis in the province. These products are expected to be available for purchase online as of Jan. 16.

Cannabis edibles are expected to attract a different segment of consumers in the sector such as non-smokers.

Edible products, which will also have a much higher profit margin, should help Canadian companies that are in difficulty to make a profit. This should also make it more difficult for black market distributors to compete.

U.S. legalization could help the cannabis edibles market

Analysts also point to the growth in the number of U.S. states continuing to move toward legalization. At least eight of them will hold referendums on the legalization of marijuana in 2020.

In most, if not all, there must be a reduction in legal restrictions. In addition, it will be a big step forward if there is federal legalization.

Among the American states studying marijuana legalization are Missouri, North Dakota, Idaho, and Wyoming.

There are also several analysts and market observers saying that 2020 could be worse, especially the first part of the year. While the beginning of 2019 was marked by major strategic partnerships with big names in other industries – such as beverage manufacturers – the expectation for the beginning of 2020 is to see mergers, consolidations, and bankruptcies.

What fuels this trend is the imminent cash shortage. It is not difficult to read news of greenhouse sales, layoffs, and devaluation of unsold stocks. For the big players, it may well happen that the situation gets even worse before there is any sign of improvement.

Two outstanding names in the cannabis industry

Not all companies in the marijuana sector had a bad year in 2019. Two extraction companies shone: Valens Groworks and Medipharm Labs.

Based in Kelowna, British Columbia, Valens is a vertically integrated cannabis company specializing in its own extraction systems, essential for the processing of other cannabinoid and terpene infused products.

Traded both in Canada and the U.S., the company’s papers appreciated more than 112% in the U.S. OTC market last year, in addition to offering returns of just over 105% on Toronto’s TSX VIX exchange.

Both companies have contracts with other companies in the industry for the extraction of waste oils in beverages, cannabis edibles, and topical use, which should have an increase in demand when they reach the Canadian retail market.

Valens also has a very low valuation per share. Its papers closed on Jan. 9 in Toronto at $2.64 (CA$3.45), a drop of 4.7%, and at $2.03 (CA$2.65), a devaluation of 4.68% on the day.

MediPharm also closed lower on Jan. 9, hitting $2.93, down 6.54% on the day. The stock closed at $3.79 in Toronto, down 6.42% on the day.

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(Featured image byConstantinos Panagopoulos via Unsplash)

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