With its recent IPO, Kanabo Group (LSE:KNB) stock has already provided shareholders with a profitable return, spiking at a high of around 40p from its initial 6.5p issue price. With the medicinal cannabis industry poised for growth of 18% per annum, by 2027 the industry could be worth some $73.6bn. Does Kanabo stock offer a perfect buy-in opportunity to capitalize on this growing market?
Who is Kanabo?
Kanabo Group is an Israel-based company that specialises in the development and production of medicinal grade and wellness cannabis products. Kanabo’s flagship product is the VapePod, a medical grade vaporiser, which it aims to sell alongside its various other CBD and THC products.
It is the first medical cannabis company to go public in the UK and has therefore caught the attention of many investors. The £6m in funds raised from the IPO will be ploughed back into research and manufacturing as the company seeks to scale up production to meet market demand primarily in Europe.
Future forecasts for the cannabis market
Many countries are taking steps towards the legalisation of these products, realising both the potential benefits of medical usage and the vast prospects these companies may offer to the domestic economy. Whilst many investors are bullish about cannabis stocks’ futures, this anticipation doesn’t come without risk.
Being such a new market, the British government has multiple regulations in place to ensure the quality and legality of products, with the majority of cannabis prescriptions being issued privately. It is regulations such as these that must be overcome before Kanabo and other cannabis companies’ products can be widely distributed.
A growing market means growing competition
Cellular Goods is another cannabis-based product to recently boast a confident IPO. The company primarily focuses on skincare products, containing cannabidiol (CBD). The CBD market is expected to reach £1bn by 2025, which certainly paves the way for an exciting future for this company.
MGC Pharmaceuticals also recently debuted on the UK market. It focuses purely on medicinal cannabis treatments. The December quarterly report confidently highlights a 67% increase in revenue of $456k comparative to the previous quarter, selling products in the UK, Brazil and Australia.
Takeaway for the Kanabo share price
Investors who got in early on Kanabo stock may be sitting on big profits. What’s more, Kanabo has just announced a new production agreement with PharmaCann Polska, a Polish pharmaceutical firm. For current investors, hopefully this will bring the production of the VapePod one step closer, allowing Kanabo to upscale production to meet potential European demand.
However, Kanabo Group still needs to compete with growing competition and regulations, coupled with the ever-present stigma surrounding cannabis-related products.
Even though Kanabo stock has seen another jump in share price of around 25% due to the recent production agreement, for me the first month post IPO is too volatile a period to invest. However, I will be keeping an eye on this stock in the long term as market demand grows.
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Dylan Hood does not have any position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.