In his latest cannabis sector equity report, senior analyst Pablo Zuanic of Zuanic & Associates offers a detailed examination of the cannabis sector’s landscape in the fourth quarter of 2023.
The report, “4Q23 Trends in Key States,” offers a crucial insight into the performances and trends influencing major players in the industry.
Analyzing Market Trends And State-Specific Observations
Despite a general trend of flat or declining sales in most states during 4Q23, Connecticut, Ohio, Illinois, Maryland and Rhode Island showed encouraging growth. Notable companies like MariMed MRMD, Verano VRNO, and Green Thumb Industries GTBIF benefitted from their diversified state exposure.
Price stabilization was evident in many states, although the rapid pace of licensing led to reduced revenue per store. This was especially pronounced in states with store caps, such as Illinois, Massachusetts, and New Jersey. The resilience of retailer economics in states like Nevada and Pennsylvania stood out.
The report highlights MSO performance variations in Florida, with Trulieve TCNNF showing stable volumes, Cresco Labs CRLBF achieving over 30% growth, and AYR Strategies AYRSF experiencing significant declines.
Assessing Catalysts And Regulatory Developments
The sector eagerly awaits the DEA’s response to the HHS’s rescheduling recommendation. This development, along with potential political shifts, could significantly impact the market.
“DEA agreeing with the HHS recommendation expected any time before June. This could be positive for stocks, but without a framework, implementation might wait until after the election, potentially capping the upside,” Zuanic wrote. “Regarding the 1/23 Boies-led lawsuit, we anticipate the DOJ will file a motion to dismiss, prolonging the process, yet remaining significant.”
Speculations about former President Trump’s support for rescheduling and President Biden’s potential cannabis legalization promise add to the sector’s dynamic environment.
Zuanic raised questions about potential “unforeseen catalysts” in cannabis rescheduling:
“Could former President Trump publicly agree with the rescheduling recommendation? Might President Biden ‘raise the ante’ on cannabis by announcing plans to legalize recreational cannabis federally if re-elected (i.e., de-schedule it federally)? Will more MSOs follow Trulieve’s example and seek tax refunds for the past three years, challenging the applicability of 280E?” Zuanic asked.
State-by-State Analysis And Company Performance
Insights from Key States
The report provides detailed insights into key states such as Arizona, California, Colorado, Nevada, New Mexico, Connecticut, Illinois, Maryland, Rhode Island, Florida, Massachusetts, Michigan, Missouri, New Jersey, Ohio, and Pennsylvania, and analyzes the company performances within these regions.
Strategic Implications And Future Outlook
Pablo Zuanic’s report underscores the complex and evolving nature of the cannabis sector, influenced by regulatory shifts and market dynamics. As the industry navigates these changes, the ability to adapt and capitalize on specific state opportunities will be critical for companies. With the DEA’s decision looming and potential political developments, the sector remains poised for both challenges and growth opportunities.
Photo: AI-Generated Image.
