The Bubble That Is The Marijuana Sector

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Summary

The marijuana industry shows high volatility through events with little overall meaning. With no proven sales, it is hard to see these companies being valued so highly. The payoff is very little due to the overvalued nature of the current sector.

Investment Thesis

As the marijuana sector has started to rocket with examples like Tilray (TLRY), Aurora (OTC:ACB) and Pyxus International (PYX), I have come to the conclusion that the marijuana sector is a bubble. Although this comes with a completely negative connotation, it shouldn’t. Unlike other bubbles, the marijuana sector is filled with companies that will succeed and exceed. These companies will be made apparent in as little time as Q2 2019 (the reason this is the catalyst is because this is when sales will come out showing which companies succeed and which don’t). That being said, there are a bunch of companies that won’t succeed. Whether apparent or not, all marijuana stock prices are priced to perfection or success. This is a give-away that the marijuana sector is a bubble. To prove this theory, throughout the article I will provide examples in the business, industries previously in a bubble, and finally, personal opinion.

No matter how we look at it, marijuana stocks are all priced in for amazing sales. Some companies have shown a good increase in revenue such as Tilray, boasting a 95% year-over-year revenue increase, but that should be expected in a new, legal market. This revenue growth is seen in every marijuana stock that I have seen and happens to be much less important than it is being played as. These increases in revenue are very unimportant when we realize that it won’t matter if they cannot hold these sales in Q2 2019.

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