Every Popular Pot Stock Is Now in Bear Market Territory

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In many ways, the legal marijuana industry is viewed as a once-in-a-generation, or perhaps once-in-a-lifetime, growth opportunity. With tens of billions of dollars in sales regularly occurring in the black market, gradually moving these transactions over to legal channels could produce substantial ripples within the cannabis community and throughout ancillary industries.

Just how big could the pot industry grow? While a handful of Wall Street firms have called for a fourfold to sixfold increase in global sales over the next decade, Bank of America analyst Christopher Carey believes the industry could deliver $166 billion in annual peak sales at some point in the distant future. Additionally, Carey foresees cannabis disrupting industries that today account for $2.6 trillion in global revenue.

A snarling bear standing in front of a plunging stock chart.
A snarling bear standing in front of a plunging stock chart.

Image source: Getty Images.

All major marijuana stocks are now in a bear market

But all of these pie-in-the-sky figures mean absolutely nothing at the moment, with every single popular pot stock now in bear market territory (i.e., down at least 20% from their all-time highs). Here's a brief rundown of how the most popular Canadian marijuana stocks have performed since hitting their all-time highs, courtesy of YCharts (through June 3):

  • HEXO (NYSEMKT: HEXO): Down 25%

  • Canopy Growth (NYSE: CGC): Down 32%

  • Aurora Cannabis (NYSE: ACB): Down 39%

  • Cronos Group (NASDAQ: CRON): Down 42%

  • Aphria (NYSE: APHA): Down 62%

  • Tilray (NASDAQ: TLRY): Down 84%

Among the six most popular pot stocks, only HEXO and Cronos Group have ascended to new highs at some point in 2019, with the other four hitting their highs in either September or October of 2018.

What's caused this complete washout in marijuana stocks, you ask? I'd offer five ideas.

A Canadian flag with a cannabis leaf at the center, and the words Sold Out stamped across the leaf and flag.
A Canadian flag with a cannabis leaf at the center, and the words Sold Out stamped across the leaf and flag.

Image source: Getty Images.

1. Canadian supply chain issues

The most logical explanation for the cannabis industry's woes has been a plethora of supply chain issues throughout Canada. Most provinces have been unable to meet demand on the recreational side of the equation, and are unlikely to be able to do so for another 12 to 24 months.

A lot of finger-pointing has gone to regulatory agency Health Canada, which was contending with a cultivation, processing, and sales licensing backlog of more than 800 applications as of January 2019. It can take months to review cultivation applications, and was taking nearly a year to approve sales applications, as of May 2018.

However, Health Canada did recently announce that it would be changing the cultivation application procedure to whittle down its immense backlog. Moving forward, applicants will need to have their grow facilities complete before submitting their applications. This should favor more established and deep-pocketed cannabis growers, like the companies mentioned above.