A Cannabis Bubble? Tim Seymour Believes Market Has Been 'Grossly Understated'

Some forecasts for the global medical cannabis market have it reaching $37 billion by 2023, with a CAGR of roughly 22 percent between 2017 and 2023. Data from Grand View Research projects that the the global market will $146 billion by the end of 2025.

Despite the expansion — or because of it — some warn that a bubble could be on the way.

Tim Seymour, CIO of Seymour Asset Management and co-host of CNBC's "Fast Money," understands the concern. Seymour will speak at the Benzinga Cannabis Capital Conference April 17-18 in Toronto.

"I'm always cautious when capital is thrown indiscriminately at any asset class," Seymour said. "What we saw in the fourth quarter of 2018 for cannabis, especially into the end of the year, was indicative of an argument that cannabis is just an extension of global liquidity conditions and markets overall."

A Bubble On The Horizon?

In recent years, several warning signs have been singled out as harbingers of an industry bubble. One of the more cited examples includes the overestimation of "next big things" in the space, like the dot-com bubble of yesteryear.

This is a concern shared by several industry experts who warn about the influx of companies entering the market. While each may be billed as a significant player, the truth is much harder to pinpoint.

Others believe now is not the time to invest due to uncertainty. George Boyan, president of Leumi Investment Services, recently called cannabis stocks "a fad."

"Who knows where the market will go? And the problem with speculative investments? They all have an expiration date," Boyan told CNN.

With uncertain valuations and prospects, many investors have their reasons to steer clear of cannabis investing at this time. Is it the right decision?

Seymour: 'Grossly Understated' Market

Seymour said there are different degrees to which a bubble is a function of the broader investment landscape and underlying enthusiasm for and focus on a new concept.

He compared cannabis to other emerging sectors, including crypto, AI, gaming and nanotechnology.

"These are all areas of extraordinary interest and arguably irrational expectations in terms of where these markets are going and what price we should be paying for them now," Seymour said.

“It doesn't mean that any or all of those are not very viable industries, sub-industries, thematic growth areas, secular changes in how we consume, how we transact and the technology underlying them."

The Cannabis Capital Conference is coming back to Toronto! Click here to learn how you can join Tim Seymour, Jon Najarian and many others.

What makes cannabis stand out to Seymour is that its reach exceeds many expectations, altering the market's actual potential.

"What is clear to me about cannabis — when I hear the reference to the tulip bulbs — is that this is not a concept as much as this is a consumer products consumption story that exists across traditional consumer staples usage, traditional recreational usage consumer staples, biopharma and lifestyle," Seymour said.

The cannabis market’s size has been adjusted “substantially” over the past six to nine months based on new assessments of the use case, he said.

Overall, Seymour believes the cannabis and hemp market has been “grossly understated," adding that the size of the markets remains unknown.

"I think investors need to focus on the reality of the opportunity."

Javier Hasse contributed to this report.

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