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2 Ways the Cannabis Industry Is Adapting to the Coronavirus Pandemic

By David Jagielski - Apr 4, 2020 at 5:12AM

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This year may not be as bad for cannabis as many were fearing after the outbreak of COVID-19.

The coronavirus pandemic is causing problems for just about every business possible, and cannabis companies are not exempt. Some cities are under lockdown, and even in those that aren't, people are staying home. That's not ideal for pot shops that have strategically staked out locations in key areas in the hopes of drawing in foot traffic to generate sales. However, the good news for cannabis investors is that the industry is adapting to the pandemic, which may lessen the blow to the financials of many pot stocks. Here are a couple of ways the industry is changing amid the pandemic.

1. Demand is moving to delivery and companies are hiring more drivers

Marijuana delivery is not a new phenomenon, but it is increasing in popularity now that consumers are warier of leaving their homes amid the coronavirus. An e-commerce platform that's used by the industry, Jane Technologies, saw a staggering increase in the number of orders placed online in March -- specifically, a 142% jump in new users who were purchasing pot online when compared to the previous month.

California-based cannabis company Harborside is currently hiring more drivers to help accommodate its customers who are buying more pot online. It's the same story in Nevada, where multiple companies are ramping up the number of delivery drivers they have on hand. Planet 13's (PLNH.F -8.35%) fleet of drivers has tripled in size, and Curaleaf's (CURLF 0.51%) Acres Cannabis, which also operates in Las Vegas, is going to start offering delivery. Previously, it used a third-party operator to deliver pot, but it will now do so itself.

Marijuana store sign.

Image source: Getty Images.

Even popular cannabis website Leafly is getting in on the action. With Leafly Delivery, customers in Arizona, California, Michigan, Nevada, and Oregon can order pot through the company's website. It also offers Leafly Pickup, which facilitates the pickup process for those who are in states where marijuana delivery is not available.

2. Curbside pickup offers a compromise in states where delivery is not legal

If pot delivery to the home is not an option, the next best alternative for customers is curbside pickup. This isn't a perfect solution in the age of social distancing, but it's a way for pot shops to sell products to consumers without requiring them to go in-store in states where at-home delivery is not yet permitted. Similar to how someone might pick up an order from a fast-food restaurant, customers have designated parking spots that they can wait in for their products.

Customers have been responding positively to the availability of curbside pickup, and there's hope that it may be more than just temporary, which is the route that many states have taken as opposed to completely permitting it. Harborside co-founder Stephen DeAngelo said, "I think we're going to learn that curbside is something we should have had available for a long time."

What does this mean for investors?

The coronavirus pandemic may not have as devastating an effect on pot stocks as it does on the rest of the market. Many pot shops are able to stay open and sell to consumers, lessening the risk that a company like Curaleaf will see a big dent in its sales. And with the possibility of a drug shortage amid the pandemic, we could also see more users turn to cannabis as a possible treatment, especially those patients who are still on the fence on medical marijuana.

Curaleaf is coming off a strong 2019, during which the company saw revenue growth of 187% over 2018. In the fourth quarter, its sales rose by 22% from the prior-year period. While it's unlikely that Curaleaf will continue to see that level of growth in 2020, especially as people are facing job losses, having curbside and at-home delivery options will at least lessen the blow to the company's top line this year.

Shares of Curaleaf are down 42% since the beginning of the year, which is worse than the S&P 500's decline of 23%. But it's a stock for investors to keep an eye on -- it's recently recovered from a new 52-week low, and it could be an attractive buy given signs that cannabis sales were showing strength in March. However, investors may want to see if that trend continues in April before buying Curaleaf or any other pot stock.

David Jagielski has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Planet 13 Holdings Inc. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Curaleaf Holdings, Inc. Stock Quote
Curaleaf Holdings, Inc.
$5.94 (0.51%) $0.03
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Planet 13 Holdings Inc.
$1.79 (-8.35%) $0.16

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