There’s no doubt that, if approved, Senate Majority Leader Chuck Schumer’s cannabis legalization bill would be a historic event for the U.S. cannabis industry. Doubtless, the market would explode. But, what is likely to happen to the market if that does not happen and there are no policy changes at the federal level?
Cantor Fitzgerald’s Pablo Zuanic believes that even without such changes, U.S. multi-state operators will continue to benefit from ever-increasing sales growth and new legal states that are rolling out their adult-use marijuana programs or enhancing their existing medical cannabis programs.
According to the analyst, sales should hit $36 billion by 2023, up from $17 billion in 2020.
As it turns out, multi-state cannabis operators usually perform better in states with more restrictive licensing systems, at least according to their EBITDA margins, which are often twice or more than those achieved in the less restrictive western states, explained the analyst.
Zuanic projects year-over-year growth in the ~25% range both for 2023 and 2024 as more states legalize.
Recreational Sales By Particular States
The analyst provided an outlook on the beginning of recreational marijuana sales by specific states:
- New Jersey – by the third quarter of 2022. With the state’s cannabis commission only recently created, Zuanic does not see adult-use sales starting before July 2022. The analyst referred to a recent talk with Curaleaf Holdings (OTCQX: CURLF) chairman Boris Jordan who expects sales to start as early as November. Although for modeling purposes, Zuanic assumes adult sales will commence in Q3 2022.
- Relying on the Arizona per cap trajectory, Zuanic projects $1.4 billion in sales for 2023. Connecticut – by the third quarter of 2022. The new law suggests that recreational sales cannot begin until there is enough capacity to meet the medical marijuana market demand. While some project sales will begin in the fourth quarter, Zaunic models Q3 2022.
- New Mexico – by the third quarter of 2022. The state of New Mexico should start issuing marijuana sales licenses on April 1, 2022. The analyst model Q3 2022, although admitting the possibility that sales could start earlier.
- New York – by the first quarter of 2023. With numerous problems delaying the rollout,
- including not having chosen members for its regulatory marijuana commission, Zuanic said that even this modeling of Q1 2023 is optimistic. The analyst further projected $2.8 billion in both recreational and medical cannabis sales for the first year.
- Virginia – by the first quarter of 2024. This date has been confirmed, but the Governor is trying to push for an earlier start.
- Maryland – by the first quarter of 2024. Adult-use sales should start around the same time as Virginia, if not earlier, said Zuanic.
- Pennsylvania – by the first quarter of 2025. The eventual start of recreational sales in New Jersey and some other states may push Pennsylvania to do the same.
- Florida…hasta cuando, as they say. Since Zuanic is only offering projections through 2025, he can’t provide a date for Florida, where recreational sales are not likely to get underway even by then. In the case of adult-use cannabis being on the November 2024 ballot and if it’s approved, sales could take at least another year to begin.
Top U.S. Picks
Zuanic confirmed that Cantor’s top U.S. picks remain Curaleaf, Green Thumb Industries (OTCQX: GTBIF), Trulieve Cannabis (OTCQX: TCNNF), and Cresco Labs (OTCQX: CRLBF).
In conclusion, the analyst advised investors to avoid “companies lacking state-level depth, ﬁnancially stretched, and those lacking proper operational focus.”
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