As world markets continue to be affected by the Coronavirus (COVID-19), corporations in all sectors are feeling the blowback from the global pandemic. From health care to technology and finance, the stock market has seen historic losses in the past two weeks. With significant drop-offs expected to continue, many investors are left wondering if the same can be expected of their marijuana stocks.
As difficult as it may be to consider right now, the coronavirus has already dramatically impacted the economy, as well as the stock market, in more ways than one. Regardless of the industry, the lung-focused virus has caused unprecedented global responses at all levels. With that in mind, here are two significant ways the coronavirus could affect marijuana stocks and things to consider as the world navigates the health crisis moving forward:
Interruption of Supply Chains
The biggest issue that all markets are faced with right now is in the form of interrupted supply chains. While many think of the marijuana industry in terms of growing and processing, there are still several moving parts that help get products to consumers. When anything disrupts the supply chain process, the whole system suffers.
One example, in specific, is the marijuana industry’s reliance on China for the production of vaporizer products. If China is unable to meet production demands for any vape-related products, cannabis companies will be forced to adjust their operations. If cannabis companies have to adjust their projected sales growth, their market value could see a significant drop.
Additionally, while some companies have different growing methods, several products are required to ensure a quality product. From heating to ventilation, each product is necessary, and all are involved in the supply chain process. Any disruption in being able to receive these products when needed could significantly affect the company’s value.
Regional Lockdowns and Quarantines
Another thing to consider is the possibility of potentially long-term lockdowns and quarantines in certain countries, states, and cities as a result of the coronavirus. While people may be able to receive cannabis products via delivery in some areas, there is still growing concern regarding a decrease in demand. If the number of confirmed COVID-19 cases continues to rise, there is a reasonable assumption that it can have lasting effects on all cannabis products and services.
Things for Marijuana Stock Investors to Consider
While a lot of trading has occurred in the past several weeks due to the coronavirus, most of which has been due to panic selling, marijuana stocks have NOT seen a significant drop as of yet. However, seeing as marijuana stocks are a volatile market, any issue with the overall stock market could significantly affect the cannabis industry as a result. It may be worth considering finding other marijuana stocks that have less exposure to the overall performance of the stock market.
That being said, again: that point has not yet been reached – which could provide marijuana stock investors with some hope.
Overall, the entire stock market is considering its investment strategies throughout this bout with the coronavirus. As many investors know, that’s just the way the market works sometimes. But with the right information, it’s still possible for many investors in the marijuana industry to see success when the global pandemic is over.
What predictions do you have about what could happen to marijuana stocks during this health crisis? Let us know in the comments below!