Why Psychedelics Stocks May Currently Be Undervalued

June 29, 2020 09:35:30

Even before the COVID-19 pandemic sucker-punched the stock market, it was rather hard for investors to find worthwhile investment opportunities. It was therefore just a matter of time before a market correction occurred, and the coronavirus outbreak provided the trigger for this correction. However, as the markets nosedive, experienced investors know that such a correction presents new opportunities. One industry where there is huge potential for investors is the psychedelics sector.

Just like the marijuana industry, psychedelics represent a novel way to treat not just mental but also physical ailments. However, that may be where the comparisons stop between those two industries.

For example, the cannabis industry can be seen as severely lacking in terms of credibility since there isn’t a whole bunch of peer-reviewed research in support of marijuana’s purported benefits. In contrast, the psychedelic industry has a lot of credible research backing it up, and that could explain why a number of psychedelic drugs have already got the nod from the FDA and regulators elsewhere.

This acceptance by the scientific community and regulators bodes well for the industry since its path from medicalization to legalization is unlikely to be as rough as the path of marijuana.

The second crucial reason why the psychedelic industry contains within it massive profitability potential is the high barrier to entry. Unlike the cannabis industry where thousands of players got involved all at once (some as growers, others as processors or retailers, for example), the psychedelic industry seems to be more focused on the pharmaceutical side rather than recreational purposes.

This focus means that only the players who are the most responsible and who command considerable resources can venture into the sector. This explains why you can count the existing players on your fingers, rather than generating a lengthy spreadsheet of listed companies. The established and upcoming players in this space include COMPASS Pathways and ATAI Life Sciences.

Such companies are unlikely to pursue growth and expansion for the sake of it, and so they are not as likely to find themselves in the same bind that the nascent cannabis industry found itself when lots of companies were compelled to go into a frenzy of dumping their holdings in order to survive in an industry that had become too competitive too rapidly.

The factors above make a strong case that psychedelics stocks are currently undervalued, and so a savvy investor can make quite a killing if they do their due diligence and select stocks poised for explosive growth in the years to come.

About PsychedelicNewsWire

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