Perfect storm for cannabis means forecast of ‘slow growth’ heading into 2025

The U.S. marijuana market is likely to slow its roll next year even more than it did in 2024, according to a new white paper from ATB Capital Markets, which outlined various reasons it expects “slow growth” to be a primary theme for public cannabis companies in 2025.

Although there will be some bright spots for industry insiders, such as federal cannabis rescheduling and decent odds for Pennsylvania to fully legalize recreational marijuana, ATB predicted that multistate operators as a whole will probably hit more headwinds, with more issues dragging them down than giving them a boost.

Those factors include:

• Ongoing widespread price compression
• Harsh retail dynamics
• Competition from hemp-based THC goods
• A lack of new U.S. state markets coming online

The investment banking firm recast its earlier projections, shifting them downward for the national U.S. marijuana market. It now expects the industry to grow by 4.6% over the next five years to sales of $38 billion, compared with its earlier forecast of 9.6% growth to $45.1 billion in sales.

ATB wrote that the revision is “admittedly conservative,” but argued it’s in line with price compression or flattened growth in a number of state cannabis markets, including Arizona, California, Colorado, Illinois, Massachusetts and Michigan.

“Longer-term we are more conservative on the growth trajectory for all states,” ATB wrote.

Worth noting, however, is that the firm didn’t factor in at all any new state markets that could come online within a few years, such as Pennsylvania, Virginia, and even maybe Florida, if a new recreational campaign pulls off a win in 2026. ATB singled out New York, Ohio and Virginia as some of the best landscapes for MSOs if the regulatory status quo persists.

In general, ATB argued, public MSOs remain undervalued as a whole, meaning many of them are likely still a solid investment as long as investors have patience to wait a few more years until they begin seeing truly healthy returns.

“The market appears to overweight near-term regulatory setbacks and underweight the long-term trend of cannabis legalization, which we think will continue with additional states opening up, eventually leading to federal legalization and interstate commerce,” ATB wrote.

Once that happens, many of the currently struggling public cannabis MSOs will almost certainly skyrocket in value.

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