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In November 2020, Oregon became the first US state to legalize psilocybin, the active ingredient in so-called magic mushrooms. Much like cannabis, psychedelics are becoming more mainstream, and investors are sizing up what could be a significant long-term growth opportunity. Market research firm Research and Markets recently estimated that the psychedelic drugs market will reach $10.75 billion by 2027.
Unfortunately, cannabis stock investors know the nascent business has faced many regulatory hurdles and bust cycles, so psychedelics market participants must have a high-risk tolerance.
Here are the top three psychedelic stocks to watch in 2022.
What are psychedelic stocks?
The psychedelics market continues to grow, and investors are looking for opportunities. A flurry of psychedelics stocks has invaded the small-cap market thanks to new company launches. Investors now have various options for taking a run in the shroom stocks space.
To expand the capabilities of the medical field, companies are starting to investigate the potential of psychedelic medicines and are looking to raise capital in the public market.
While this industry is still in its early stages, the promising potential of psychedelic medicine drug products has attracted the interest of savvy investors eager for an emerging investment opportunity.
How to buy psychedelic stocks?
A UK survey into the use of psychedelics reported that 55% of the population supports legalizing and opening up access to psychedelics. At the same time, a US study concludes that “growing acceptance of psychedelic drugs for treating depression across the US is one of the prominent factors for an upsurge in demand for psychedelic drugs.”
Most psychedelic stocks are listed on Canadian exchanges but are available via US over-the-counter markets appearing under slightly different ticker symbols.
Some psychedelics companies are hoping to uplist to the NASDAQ. For example, MindMed trades under MMED on the NEO exchange, based in Canada.
However, you need to sign up with a broker before buying stocks.
Top 3 psychedelic stocks to buy in 2022
All psychedelic stocks are simply healthcare stocks that focus on the use of hallucinogens in treating diseases. Most companies have relatively low market capitalizations because the area is still relatively new. However, many of them are overgrowing. Here are three of the best psychedelic stocks.
No. 1. COMPASS Pathways plc (CMPS)
Price: $14.22
EPS: $-1.79
Market cap: $597.31M
CMPS price chart
CMPS is primarily involved in researching and developing psilocybin therapy for end-of-life anxiety and producing psilocybin for research. Given the significant gap in treatment for mental illnesses, it is mainly focused on developing psilocybin therapy for treatment-resistant depression (TRD).
The company operates principally in New York, USA, and is headquartered in London, UK. It started clinical trials for the purpose in 2017. However, later-stage clinical trials are still some way off, only after which it will be able to apply for regulatory approval, followed by commercialization and sales.
CMPS summary
The analysts offering 12-month price forecasts for CMPS have a median target of 67.50, with a high estimate of 120.00 and a low estimate of 30.00. The median estimate represents a +376.02% increase from the last price of 14.22.
The first three holdings:
- AGF Investments Inc.
- Victory Capital Management Inc.
- Morgan Stanley
No. 2. Mind Medicine (MindMed) Inc. (MNMD)
Price: $1.11
EPS: $-0.22
Market cap: 469.91M
MNMD price chart
Mind Medicine Inc. is a psychedelic medicine biotech company that discovers, develops, and deploys psychedelic inspired medicines and therapies to address addiction and mental illness.
The compan’s work is highly experimental, although it currently has an ongoing clinical trial focused on micro-doses of LSD to help lessen anxiety in people. It assembles a compelling drug development pipeline of treatments based on psychedelic substances, including Psilocybin, MDMA, DMT, and an Ibogaine derivative, 18-MC. It is approaching developing the next generation of psychedelic-inspired medicines and therapies.
Its stock trades at the depths of the penny stock league tables, and the share price is currently worth only $1.11. However, the company’s stock has fallen about 22.50% year-to-date, although considering the benchmark S&P 500 has also fallen nearly 5% in the same time frame shows it’s not just psychedelics experiencing a bear market.
MindMed summary
The analysts offering 12-month price forecasts for the company have a median target of 4.24, with a high estimate of 7.99 and a low estimate of 3.00. The median estimate represents a +298.17% increase from the last price of 1.07.
The first three holdings:
- Blackrock Inc.
- State Street Corp.
- Geode Capital Management, LLC
No. 3. ATAI Life Sciences (ATAI)
Price: $5.25
EPS: $-3.94
Market cap: 843.733M
ATAI price chart
ATAI Life Sciences is developing multiple drugs based on ibogaine, ketamine, and other psychedelic substances. ATAI went public in June 2021, and its early investors include billionaire venture capitalist Peter Thiel. ATAI has struggled since it priced its IPO at $15, and the stock is now trading under $5.70.
However, famous stock picker and ARK Invest founder Cathie Wood gave the stock a vote of confidence in February when she began buying shares of ATAI through her ARK Genomic Revolution ETF (ARKG). ATAI has nine drug candidate programs, four of which are already in clinical testing. Its leading drug candidate, RL-007, is in Phase 2 testing to treat schizophrenia.
ATAI summary
The analysts offering 12-month price forecasts for the company have a median target of 26.00, with a high estimate of 50.00 and a low estimate of 9.00. The median estimate represents a +388.72% increase from the last price of 5.32.
The first three holdings:
- Alpha Wave Global, LP
- Morgan Stanley
- Blackrock Inc.
Final thoughts
Investors on the lookout for the most intriguing opportunities in the public space are getting a taste of another early-stage growth segment. When it comes to which psychedelics stocks to watch, a growing list of names will become available as interest in the space increases.
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