BAML on CBD
On June 5, Bank of America Merrill Lynch upgraded Cronos Group (CRON) to a “buy,” citing its potential launch in the US market. BAML also estimated that the CBD market will grow to $11.5 billion by 2032 from $2 billion currently.
Interestingly, this move comes despite the recent comments by the FDA on CBD-based products. The FDA seemed uncertain about CBD derivative products and their effect on human health.
What the FDA said
According to CNBC, the FDA’s commissioner, Ned Sharpless, stated, “There are real risks associated with [THC and CBD] and critical questions remain about the safety of their widespread use in foods and dietary supplements, as well as other consumer products — including cosmetics, which are subject to a separate regulatory framework.”
Nonetheless, cannabis companies are actively strengthening their foothold in the country. Perhaps, on the optimism that the US regulators may work towards the development of the cannabis market as opposed to simply shutting it down. After all, the US’s recent hemp legalization would need support from regulators if products derived from hemp were to take a foothold in the country.
At the moment, betting on the US is largely a gamble until cannabis is legalized at the federal level. There have been developments in that direction, but nothing is concrete yet.
Even Canopy Growth (WEED) (CGC) seemed unsure about the US market. In a recent interview with The Street, Canopy Growth’s CEO stated, “We have nothing in over the next 24 months that requires input from the US.” Note that Canopy Growth’s deal to acquire Acreage Holdings (ACRGF) is contingent on legalization of cannabis at a federal level.
Read Should You Hold On to Your Cannabis Stocks? for more information.