The initial buzz surrounding ASX cannabis stocks saw a lot of early investors reap a lot of early profits, while many latecomers lost their shirts.
The party started when Canada and the United States moved to legalise not just medicinal cannabis but also recreational use among adults. That was a national decision in Canada, while in the US, it remains a state-by-state call.
Australia's federal government, rarely one to grab the reins, eventually followed suit and legalised medical cannabis use in 2016. In 2018, certified companies were given the green light to export marijuana products from Australia.
This saw many ASX cannabis stocks rocket higher in 2021 and into 2022.
And then many shareholders got burnt.
Here's how these three former smoking hot stocks have performed over the past five years:
- Little Green Pharma Ltd (ASX: LGP) shares are down 74%
- Cann Group Ltd (ASX: CAN) shares are down 88%
- Ecofibre Ltd (ASX: EOF) shares are down 99%
As for the past 12 months, only Little Green Pharma has managed to stem the bleeding, with shares trading at 12 cents apiece today, right where they were 12 months ago.
Ecofibre shares, on the other hand, have plunged 62% over the 12 months, while Cann Group shares are down 52% since this time last year.
But with medicinal cannabis sales in Australia reported to be "booming", could these beaten-down ASX cannabis stocks reignite?
ASX cannabis stocks in fast-growing market
Citing the Penington Institute's latest annual Cannabis in Australia Report, The Guardian notes medicinal marijuana sales Down Under look to have quadrupled over the last two years.
And the uptake in medical cannabis still appears to be gaining momentum.
According to the report, 2.87 million units were sold in the first half of 2024, up 71% from the 1.68 million units sold in the second half of 2023.
The report said Aussies spent around $234 million on medicinal cannabis in 2022, $448 million in 2023, and $402 million in the first half of 2024.
With this growth in mind, ASX cannabis stocks could be eyeing a $1 billion annual market by the end of 2024.
"We're expecting that by the end of this year it will have reached a billion [dollars], which is more than quadrupling the 2022 numbers," Penington Institute CEO John Ryan said.
Recreational legalisation not on the short-term cards
In both the US and Canada, recreational use of marijuana was legalised years after it was given the green light for medicinal use.
Wayne Hall, from the National Centre for Research on Youth Substance Use Research at the University of Queensland, noted (quoted by The Guardian), "When you create a medical cannabis program … the pressure is often brought to bear to expand it, so it merges into a de facto legal cannabis market for adults."
Legalised recreational use in Australia would likely send ASX cannabis stocks marching higher.
To date, only the Australian Capital Territory has made this move. The ACT doesn't allow commercial sales, instead mandating that people grow their own.
Investors in ASX cannabis stocks hoping to see the Australian government legalise recreational use were handed a setback yesterday when the bill was voted down.
