The cannabis industry's growth potential is one of the key reasons investors have been buying up pot stocks in recent years. One of the most recent estimates, by research company Fortune Business Insights, projects the global cannabis market will be worth more than $97 billion by 2026. Estimates like this sound impressive and are very effective in attracting investors. But investors shouldn't be quick to rely on these numbers for a couple of important reasons.
Predicting how large the cannabis industry will become in the future is a very challenging task. In making these calculations, analysts need to consider which geographic markets will fully legalize pot, and estimate how large those particular markets will be, while also accounting for country-specific variables that might affect the industry's growth.
Even just forecasting how large the U.S. market will be is a big enough challenge on its own. Federal legalization of marijuana may seem inevitable, but when exactly that will happen is a big question mark, and next year's election could have a significant effect on that. While some presidential candidates are in favor of legalizing marijuana, others are not.
That's why these estimates for the cannabis market, whether global or domestic, can be very unreliable since there are so many assumptions involved in them. Investors also don't know how sound the logic is in coming up with these numbers, and that's why there can be significant variations across estimates.
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