Cannabis Investors Underestimate Upside Of 'Blue Wave' Election, Analyst Says

Cannabis investors have endured a brutal 2020, and hopes that the November election will serve as a catalyst for federal US legalization are fading fast.

However, according to Cantor Fitzgerald analyst Pablo Zuanic, a potential election “blue wave” victory for Democrats could be more bullish for cannabis stocks than investors realize.

Election Year Disappointment: Many investors were hoping that federal legalization of cannabis would be a hot topic this election year, but neither US presidential candidate has made it a key focus of his campaign. A late 2019 Gallup poll found that 76% of Democratic voters favor marijuana legalization, yet the official 91-page Democratic Party platform document released this year only mentioned “marijuana” and “cannabis” three times, and not at all until page 37.

Democratic nominee Joe Biden, who leads President Donald Trump handily in the polls, has consistently said he is in favor of more cannabis research before he endorses federal legalization.

Related Link: Cantor Fitzgerald Sees 'Near-Term Upside' For Canopy Growth

Despite the seeming roadblock for recreational legalization, Zuanic said Wednesday that a Biden victory coupled with Democrats regaining control of the Senate could be a major bullish catalyst for cannabis stocks.

MORE Act Impact: Congress has already tabled several pieces of legislation that would potentially ease federal restrictions on cannabis without outright legalizing recreational marijuana use nationwide. A Biden victory and a blue House and Senate would likely open the door for passage of at least one of those bills, Zuanic says.

For example, Biden’s running mate Kamala Harris sponsored the Marijuana Opportunity Reinvestment and Expungement Act (MORE), which would deschedule cannabis from the Controlled Substance Act and expunge criminal convictions related to federal cannabis offenses.

“It would also provide access to capital and a slew of banking services that would lower funding costs (currently hovering in the low-teens or higher), reduce cash handling costs, and likely boost demand given access to new payment mechanisms,” Zuanic said.

He said the MORE Act or a similar bill would drive between 30% and 60% upside in profitable us multi-state operator stocks simply due to increased cash flow.

Zuanic named Trulieve Cannabis Corp TCNNF as his top US MSO stock pick followed by Green Thumb Industries Inc GTBIF, Curaleaf Holdings Inc CURLF and Cresco Labs Inc CRLBF.

Benzinga’s Take: Online prediction market PredictIt suggests Biden has a 67% chance of beating Trump and Democrats have a 61% chance at winning the White House, the House and the Senate. Cannabis stock investors can help mitigate risk associated with the volatile industry by buying a basket of Canadian legal producers and U.S. multi-state operators that have high-quality balance sheets and leading market shares.