Marijuana Stock Bubble

After this month’s passage of recreational marijuana initiatives in California, Massachusetts and Nevada as well as medical marijuana initiatives in Florida, North Dakota and Arkansas – the total market cap of publicly traded marijuana companies has soared to a new all-time high of USD $4.88 billion, up 246% from only USD $1.41 billion three months ago!

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In early 2014, after marijuana officially became legal in Colorado, the total market cap of marijuana stocks exploded from only USD $230 million to a peak of USD $3.1 billion – before experiencing a dramatic decline of -75% to a low in 2015 of USD $780 million.

There are 40 marijuana “pure plays” trading in the U.S. and Canada, giving the average marijuana stock a market cap right now of USD $122 million – despite the fact that the majority of them have no revenue and 100% of them are losing money with negative free cash flow.

Currently, the total trailing twelve month revenue of publicly traded marijuana companies is only USD $90 million. Although their annualized revenue is up 73% from only USD $52 million one year ago, the industry is now being valued at an insanely high 54.22X sales!

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We could easily see another short-term collapse in marijuana stock valuations of -75% or more!