A series of scandals and oversupply problems sent cannabis stock prices tumbling. However, analysts are optimistic and smaller companies like GreenStar Biosciences Corp.’s (CSE: GSTR) offer light at the end of the tunnel.

After a strong start to 2019, the cannabis sector has gone through a tough six months. A constant stream of bad news and a chronic oversupply problem has sent stock prices spiraling and CannTrust is the latest victim.

The shares of the Canadian cannabis supplier slumped by fourteen percent pre-trade on Wednesday. Since the high of CA$13.45 dollars at the end of March, the stock had already collapsed to CA$2.00.

The Canadian health authorities have banned CannTrust from production and sale.

The company had ignored regulations at its Vaughan plant in the state of Ontario. Among other things, the supervisors criticized the lack of permits for storage rooms and inadequate safety precautions.

According to CannTrust, it accepted the list of shortcomings and promised remedy. Already last month, CannTrust had to temporarily stop the sale of all products because according to investigations by the authorities, part of the processed marijuana comes from unlicensed suppliers.

This makes CannTrust one of a long list of negative reports from the industry. Another well-known example was Aurora Cannabis. The Edmonton-based company had disappointed analysts last week with its quarterly figures that fell well short of expectations in both sales and profits.

Aurora stock then continued its downward slide and fell to a paltry $5.27; at the end of March, it was still worth almost 10 dollars. The other listed cannabis stocks were similarly hard hit, whether it was Canopy, whose price halved since April. Even Tilray suffered a crash from 70 US dollars to 30 dollars.

In the previous year, the stock had shot up by a whopping 400 percent within three months. Now there is great concern that the cannabis stocks have apparently gone too hot and that the hype could already be over.

Analysts remain hopeful regarding the Cannabis Market

But it’s not that simple. Analysts have warned from the outset that cannabis stocks are not for investors with weak nerves. Walter Vorhauser, an expert at the Oddo Seydler Bank, compared the cannabis industry with the beginnings of biotechnology. There is also high volatility in this industry, the fluctuations of stock prices are enormous with big highs and lows.

But the cannabis business is on its way to becoming big, said the expert. As a result of increasing legalization, investments in research, cultivation, processing, and distribution are growing. At the same time, many new companies are being founded, not all of which will survive in the long term. This is also due to lack of investment, as the majority of funds are currently going to the growers and processors of cannabis remain overlooked by many investors, causing supply chain problems.

GreenStar Biosciences Corp. (CSE: GSTR) is one of the companies hoping to correct the course of the sector. The GreenStar team has extensive experience in the Canadian cannabis market and specializes in identifying local cannabis companies and guiding them to success. Their tenant partner company Cowlitz County Cannabis Cultivation Inc. is generating revenue of $4 million each quarter and growing. Last year Cowlitz recorded a stunning revenue of $14.6 million after just five years of operations.

Cowlitz is just the beginning and GreenStar plans to get involved in all aspects of cannabis delivery life cycle. Their strategy is predicated on finding promising local players and helping them rapidly reach a position of dominance in their specific market. This approach will help generate big returns for GreenStar.

“Ideal buying opportunity”?

Matthew McCall of US investment advisor Penn Financial also expects sales in the cannabis industry to continue to grow. The investment company Acreage Holdings, which holds cultivation and distribution licenses, should benefit in particular from this. According to McCall, the low prices of many cannabis stocks currently represent an ideal buying opportunity.

In October last year, cannabis suppliers received an enormous boost with the complete release of marijuana in Canada. In addition, there is a growing number of cannabis legalization in the USA – 30 states already allow the use of cannabis for medical purposes.

Many market participants are hoping for further openings in the Cannabis Market.

On October 17th, Canada plans to allow the sale of non-alcoholic beverages and foods containing cannabis.