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Here’s Where Marijuana Stocks May Be Headed Next Year

LAS VEGAS — Canada's marijuana-stocks bubble will pop or at least deflate next year, as soaring valuations hit financial realities, Chris Walsh, founding editor of Marijuana Business Daily, predicted in a pot conference here.

Speaking at MJBizCon at the Las Vegas Convention Center, Walsh told attendees that the "bumps aren't over" in Canada's recreational market, which came to life on Oct. 17. But since then, shortages have persisted, as producers try to widen their capacity to make more weed.

How that market plays out, he said, could offer a taste of what's to come in the U.S., as more states legalize and hopes increase for friendlier tax and banking laws to the cannabis industry stateside.

Walsh also predicted — with the caveat that there were no guarantees — that at least one mainstream company would make a move into the marijuana industry. Three more states could legalize in one way or another, he said. Six more nations could also legalize medical marijuana next year, he predicted.

Marijuana Stocks: Predictions For U.S. Markets

Last week's midterm elections in the U.S. were bullish for marijuana stocks. Walsh's presentation pointed out the departures of anti-cannabis officials like Attorney General Jeff Sessions and Rep. Pete Sessions, generating applause.

The U.S. cannabis retail market could reach as high as $24.3 billion in 2022, up from the estimated $7.4 billion to $9.3 billion expected for this year, he predicted. But as recreational sales grow, medical sales could fall off.

"A lot of people end up switching to the rec market even if they're using it for medical purposes," he said.

Walsh also said Michigan, which voted to legalize recreational marijuana after this month's midterm elections, could become the second-biggest market after California in the years to come, with sales potentially reaching $1.7 billion.

But as more states legalize recreationally, there are signs that the markets in states like Colorado and Washington are maturing.

Sales growth trends there are slowing from the high-double-digit growth of previous years, he said. Wholesale prices are dropping as competition grows, he said. And he said that as more states legalize recreationally, there's less of a need for people to go to a state like Washington as a tourist.

Among Canadian marijuana stocks listed in the U.S., cannabis prices have been an issue too. Quarterly reports this week showed that Tilray (TLRY) and Cronos Group (CRON) saw prices for their products fall, while Aurora Cannabis (ACB) and Canopy Growth (CGC) saw prices increase.

Shares of Tilray dropped 8.3% on the stock market today. Cronos stock lost 2.3%, Aurora sank 8.1%, and Canopy Growth tumbled 11%. On Wednesday, Andrew Left of short-seller Citron Research reiterated his bearish stance on Canopy, Cronos and Tilray, while on CNBC.

Cannabis Branding: One State At A Time

Meanwhile, as more U.S. cannabis companies try to establish unique product brands to stand out, they could have trouble rebuilding the goodwill or commitment to those products when they expand into new states.

"You've got to rebuild everywhere you go," Kris Krane, president of cannabis company 4Front, said in an interview.

He said that some customers were beginning to commit to certain branded products in states where legalization has been around longer. But many U.S. cannabis companies, in many ways, still build their reputations on a state-by-state basis, rather than nationally.

"Going from state to state to state with brands is really challenging," Krane said.

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