Cannabis stocks resemble bitcoin and the dot-com bubble
The hype and subsequent slump in cannabis growers' share prices remind stock market professional Tom Lee of two other major crashes that happened in 2018 and early 2000s..
Managing Partner of Fundstrat Global Advisors told CNBC that the performance of the cannabis sector appears to be similar to the Bitcoin craze and the dot-com bubble at the turn of the century.
Lee didn't go so far as to say that a bubble burst in the cannabis sector. But he thinks the industry reminds him of some of the early internet business models, which he called a kind of «unprofitable prosperity».
«There may be a growing demand, but until someone really can get the value right, it will be difficult to create something that will generate sustainable profits and distribution.», – said Lee.
Some analysts have noted for a while that the cannabis industry is reminiscent of the Bitcoin launch in 2017..
Like the marijuana sector, cryptocurrency has become a huge phenomenon and has caused excitement among investors. Bitcoin skyrocketed from $ 3,600 per coin in 2017 to over $ 19,000 in December of that year. Bitcoin fell sharply during 2018 and ended the year at around $ 4,000. Bitcoin currently has a market value of just over $ 130 billion.
After the bitcoin craze faded, some investors believed the cannabis industry was the next big growth area..
But the sector has come under pressure from slow roll-out of retail stores in Canada, as well as legislative uncertainty in the United States..
Shares of the largest cannabis companies skyrocketed in 2018, but they are all poised to plummet for the year. Canopy Growth, the world's largest publicly traded cannabis company at market value, fell 64% from its all-time highs, down about 26% in 2019. Tilray is down more than 75% this year, while Aurora Cannabis has lost almost 60% in value.
The industry hopes the recent market launch of Cannabis 2.0, a marijuana derivative, including food and beverage, will generate consumer interest and boost sales.