Newsflash: When marijuana is legalized, Americans will buy marijuana legally.
Canopy Growth (CGC 1.89%) stock inched 3.2% higher through 10:35 a.m. ET Monday after marijuana news source Marijuana Moment reported on a new positive development for the (legalized) marijuana industry:
According to cannabis telehealth platform NuggMD, most Americans now prefer to buy their weed from legal sources.
The legal marijuana market
There are caveats to this conclusion. As Marijuana Moment describes, NuggMD’s survey focused on buyers in states that have legalized marijuana at the state level. Even in these states, not all purchases are from sellers legally licensed to sell marijuana. Still, about 77% of buyers surveyed said they get all or most of their marijuana from such businesses — which are the very ones that Canopy Growth would be selling through.
Only about 10% of buyers admit they buy mostly or entirely from unlicensed sellers. What’s more, 4% of buyers surveyed admit they simply don’t know if their sellers are licensed or not.
Highlighting that fact may remind an investor: Most buyers probably aren’t terribly assiduous in determining the legality of their source. And the real number of illicit buys may be a bit higher than NuggMD estimated.
Is Canopy Growth stock a buy?
Summarizing and commenting on the results of its poll, NuggMD called all of the above “a leading indicator of how the consumer market will trend” as more states continue to legalize marijuana use, and even more so, as the holy grail of full-scale federal legalization of marijuana approaches. Broadly speaking, marijuana legalization seems to work, and when and where the drug is legalized, consumers generally prefer buying from legal sources.
That’s probably good news for Canopy Growth as it moves to build out its own legal Canopy USA business in anticipation of federal legalization. It doesn’t necessarily mean that legalization will turn Canopy Growth profitable (and psst! Canopy Growth has never been profitable, even in its home Canadian market, which is legalized).
But at least it means Canopy Growth will have plenty of customers.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
