The marijuana industry is evolving before our eyes. What had once been a taboo industry that was dominated by the black market and dried cannabis flower will soon be no more.
Following the recreational legalization of cannabis in Canada last October, and the ongoing push to give the green light to medical and recreational weed at the state level, acceptance of marijuana into legal channels is growing.
More importantly, at least from an investment perspective, we’re also seeing consumer buying habits shift. Dried flower is now viewed as yesteryears’ preferred consumption source. A younger generation of pot users prefers derivative options, such as oils, edibles, infused beverages, topicals, vapes, concentrates, and much more. These alternative consumption options usually have a much higher price point than dried flower, and they generate considerably juicier margins…
Four “smoking”-hot marijuana vape stocks you’ll want to know
According to investment firm GMP Securities, extracts stand to make up at least half of the Canadian market over time. Roughly 10% of this market could be in the form of nonalcoholic cannabis-infused beverages, with another 15% derived from edibles.
But the creme-de-la-creme of derivative products is expected to be vape pens, with 20% of the total market. If Arcview and BDS Analytics are correct with their estimate of close to $5 billion in total Canadian pot sales by 2024, and GMP is right about vapes being the dominant derivative, we’re talking about at least a $1 billion vape market in Canada, and presumably a multibillion-dollar vape market in the United States.
The good thing for investors is that there are two primary ways to play the cannabis vape market. They can either choose to buy the vaporizer manufacturers and suppliers, or go after the recurring revenue provided by the extract suppliers. No matter investors’ preference, there are a handful of must-know cannabis vape stocks.
Cannabis extract suppliers
Potentially the most high-profile of all the vape extract companies will be Cronos Group (NASDAQ:CRON), which closed a major equity investmentfrom tobacco giant Altria (NYSE:MO) in mid-March. Cronos Group plans to focus most of its production on derivative products, and it would only be logical if Altria, the company that sunk $1.8 billion into Cronos for a 45% stake, aided with that development process.
As a reminder, Altria made a substantial $12.8 billion investment in vaping device maker Juul in December, which is good enough for a 35% stake. This investment came just weeks after announcing its stake in Cronos Group. With access to the most popular vaping device (at least in the U.S.) through its equity partner, Cronos Group may have an outlet for success in Canada, as well as in the United States, if the federal government ever changes its tune on marijuana.
The other must-know extract provider in the vape space is The Supreme Cannabis Company (NASDAQOTH:SPRWF). That’s right, not Aurora Cannabis or some other much larger producer, but modestly sized Supreme Cannabis Company.
With perhaps 50,000 kilos of production a year from its flagship 7Acres campus, this is an easy company to overlook. However, the company’s cannabis quality cannot be underestimated. There are only a small percentage of growers focused on the ultra-premium and premium-quality dried cannabis and extract market, and Supreme Cannabis is one of those companies. Having recently partnered with PAX Labs to supply extracts for the PAX Era pen-and-pod vape system, Supreme is in the perfect position to reach a more affluent vaping clientele…
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