In case you haven't noticed, the legal cannabis industry is turning into a big-money business.

As recently as 2014, the global cannabis industry was just a seed that was beginning to find its roots. The duo of Arcview Market Research and BDS Analytics notes that worldwide licensed-store sales (i.e., legal sales that don't include cannabinoid pharmaceutical sales and general store cannabidiol revenue) were "only" $3.4 billion in 2014.

However, in 2018, global licensed-store sales surpassed $10 billion for the first time in history. And this could be just the beginning. With more U.S. states looking to legalize recreational marijuana in 2020 -- the United States is considered the crown jewel of the cannabis legalization movement -- and more countries giving medical marijuana the OK, the outlook for legal marijuana is certainly looking greener.

In fact, things are looking so good that one Wall Street firm recently raised its outlook for U.S.-based marijuana sales.

U.S. pot sales could more than double by 2022

In a research note released early last week, Canaccord Genuity analyst Bobby Burleson forecast that legal-channel U.S. sales would hit roughly $22 billion by 2022. According to Barron's, which first reported on Burleson's note to clients, the Canaccord analyst had previously predicted a compound annual growth rate (CAGR) of 19% between 2019 and 2022, but has since upped his (and his firm's) outlook to a CAGR of 20%. Either way, Burleson's U.S. retail sales target implies a better-than-doubling of marijuana sales in the U.S. between 2018 and 2022.

The impetus for the stronger outlook appears to be Illinois becoming the 11th state to legalize adult-use marijuana. Democratic Gov. J.B. Prtizker signed the decriminalization bill into law in late June, and Illinois is on track to begin recreational weed sales on Jan. 1, 2020. Burleson wound up lifting his 2020 sales estimate for Illinois to $488 million from $277 million following the announcement, with a CAGR forecast of 66% between 2019 and 2022 for the Land of Lincoln.

Despite tax-related issues in California that have allowed illicit producers and retailers to thrive, the Canaccord analyst also foresees that state hitting $5.6 billion in legal-channel pot sales by 2022. Burleson fully expects that California will crack down on illicit producers, which should be a positive for companies operating within legal channels.

Interestingly, though, Burleson doesn't foresee New York becoming a recreationally legal state until 2022, and he makes no mention of New Jersey pushing for adult-use cannabis anytime soon. Burleson does, however, see the potential for higher sales estimates in the Garden State following the recent expansion of its medical marijuana program. 

A double-edged sword for U.S.-focused marijuana stocks

If Burleson's prognostication proves even remotely accurate, it would appear that the premiums being bestowed on multistate cannabis stocks make sense.

Vertically integrated dispensary store operators like Curaleaf Holdings (NASDAQOTH:CURLF), MedMen Enterprises (NASDAQOTH:MMNFF), Cresco Labs (NASDAQOTH:CRLBF), Harvest Health & Recreation (NASDAQOTH:HRVSF), and iAnthus Capital Holdings (NASDAQOTH:ITHUF), have been aggressively expanding into new states, and making costly acquisitions to infiltrate new markets and acquire new retail, grow farm, and processing licenses.

To rattle off a few examples:

• Curaleaf is buying the Select brand from Cura Partners for about $950 million in an all-stock deal.
• MedMen is in the midst of buying privately held PharmaCann for the tidy sum of $682 million in an all-stock acquisition.
• Cresco Labs is ponying up $823 million in an all-stock deal to purchase cannabis distribution license holder Origin House (NASDAQOTH:ORHOF) (based on the share price when the acquisition was first announced).
• Harvest Health agreed to buy privately held Verano Holdings for approximately $850 million in an all-stock deal.
• iAnthus Capital completed a nearly $600 million deal to buy MPX Bioceutical earlier this year, thereby expanding its reach.

MedMen's purchase of PharmaCann will give it access to the Illinois market, Harvest Health will have access to 17 total states, and Cresco's acquisition of Origin House means getting its in-house-branded products into more than 500 California dispensaries. The simple point being that these deals, while pricey, are bringing brand-name U.S.-focused pot stocks into many of the most promising U.S. markets.

Unfortunately, there is a price to be paid for this expansion -- and  investors might foot the bill.

With the exception of Curaleaf and MedMen, most of these U.S. dispensary stocks are only operating a handful of stores at the moment, which means the only real source of cash to fund acquisitions and retail-level expansion is common stock issuances. Although there's been plenty of appetite in the investment community for these newly issued shares, the impact on existing shareholders remains markedly negative.

A ballooning outstanding share count weighs on longtime shareholders, and it can adversely impact earnings per share (EPS) for profitable pot stocks -- a worry that won't really impact this group of stocks until 2020. Nevertheless, a rising share count does mean that future EPS estimates may be too optimistic.

Each and every one of the deals described above is being financed with common stock issuances. And in many instances, the value of the deal works out to a significant percentage of each company's current market cap. For instance, Cresco's proposed buyout of Origin House would exchange 0.8428 Cresco shares for each Origin share held by investors. That means the value of the deal would be more than half of Cresco Labs' current market cap, which means plenty of dilution for shareholders. 

Likewise, iAnthus's already-completed deal to buy MPX Bioceutical   has created a company with nearly 800 million Canadian dollars in assets, but a ghastly CA$555 million in goodwill that it may never recoup.

In short, while plenty of opportunity does exist for the burgeoning U.S. marijuana market, investors in U.S.-focused companies may not benefit as much as they expect.