Analysts say marijuana stocks could be approaching a height from which they will soon fall
The Gartner Hype Cycle is a model used to teach MBAs around the world about the typical path of new technology. Produced by the global research and advisory firm Gartner, it applies directly to the fluctuations of new industries on the stock market. Could it indicate that marijuana stocks are poised to crash?
The cycle begins with an innovation trigger. In the case of marijuana stocks, this would be the widespread legalization of cannabis for medical or recreational use. From there, expectations spike up to what Gartner terms the “peak of inflated expectations,” which is followed by a swift crash.
The cycle can be applied to any disruptive technology, from 3D printing to augmented reality and blockchain security. Once investor expectations become overly inflated, they soon crash into what Gartner coined the “trough of disillusionment.”
Tech that is actually valuable then rises out of the trough through the “slope of enlightenment” and up onto a “plateau of productivity.”
According to Gartner Hype Cycle followers, understanding the cycle is incredibly important when it comes for determining the best time to invest in an emerging industry. If cannabis stocks are at or very close to peak hype, their impending fall could be coming sooner than later.
Signs that the industry could be at peak hype include the current standing of Canopy Growth, a marijuana stock that is widely argued to be overvalued. Canopy Growth currently sits among household names including soupmaker Campbell, Viacom, Western Union, Harley-Davidson, Xerox, and Mattel with its market cap just over $10 billion.