Yahoo — Cannabis is on track to be an even bigger disruptive force than previously anticipated, according to one of the industry’s top analysts.
Vivien Azer, Cowen’s managing director and a leading analyst in the cannabis space, on Tuesday bumped up her forecast for U.S. cannabis sales to reach $80 billion by 2030, an increase of $5 billion from earlier estimates. This would represent an about 4% compound annual growth rate, relative to what Azer estimates is an about $50 billion industry today, and assumes federal legalization. Higher growth expectations in nascent markets as new states legalize medical and adult-use cannabis, as well as higher-than-expected incidence and reengagement rates into cannabis among lapsed users, drove the loftier outlook.
“We expect continued growth in newly established U.S. states, and more robust growth in Canada as more supply comes online and new form factors hit the market,” Azer said Tuesday.
Among the beneficiaries of the rapidly inflating cannabis industry will be Tilray (TLRY) and Canopy Growth Corporation (CGC), which Azer believes will “finally start to see the true benefits of adult use sales and the lapping of upfront investments made in calendar 2018 to scale up ahead of adult use.” Azer carries an Outperform rating on shares of both Canadian cannabis companies, as well as for those of American cannabis packaging company KushCo (KSHB).
Azer anticipates that Tilray and Canopy Growth Corporation will see triple-digit revenue growth in 2019 as additional capacity comes online. Her prediction comes even as the two companies have posted disappointing earnings results in their latest reports. In the third quarter of 2018, Tilray reported revenue growth of 86%, but pinched gross margins and lower average selling prices. And Canopy Growth Corporation in November reported its first quarter-on-quarter revenue drop in at least three years.
In the U.S., recent consumer use rates exceeded Cowen’s expectations. While Cowen modeled for cannabis incidence of 21% for 18- to 25-year-olds and 7.6% for users 26 and over for 2017, actual data from the National Survey on Drug Use and Health came in at 22.1% and 7.9% for the two major age demographics, respectively…
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