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The cannabis market in California has generated more than $1 billion in revenue for the state since January 2018, when adults were first able to legally buy pot there for recreational use. Prior to full legalization, the California Legislative Analyst’s Office, which is tasked with advising the legislature on policy and fiscal issues, estimated that at its peak, the cannabis industry could generate $1 billion in tax revenues annually in the state.
For comparison, Colorado hit a total of $1 billion in tax revenue from pot sales only last year, after legal cannabis had been available for more than five years.
California’s strong results come despite the fact that pot sales by illicit dealers still account for approximately 75% of the total in the state. And there’s concern that the growth in the legal market is stalling. In the fourth quarter of 2019, legal pot sales increased by just 1.5% from the prior quarter. That was the smallest quarterly growth rate since pot sales began — revenue has typically grown by more than 15%.
Image source: Getty Images.
California market still very attractive for pot producers
Curaleaf (OTC:CURLF) is among the bigger cannabis companies operating in the California market after its acquisition of Cura Partners, which owned Select — a popular cannabis brand on the West Coast. In Curaleaf’s last reported quarter, sales were up 189% year over year to $61.8 million. And factoring in its pending acquisitions, pro forma revenue was more than double that at $129 million.
Unfortunately, amid layoffs and a lot of instability in the cannabis industry of late, Curaleaf’s stock price has slid. Over the past six months, its shares are down more than 40%. However, that’s still significantly better than the performance of the Horizons Marijuana Life Sciences ETF (OTC: HMLSF), which tracks the North American Medical Marijuana Index. That ETF is down by about 60% over the same period.
David Jagielski 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.”>