Cannabis stocks have been on fire since Kamala Harris said Democratic presidential candidate Joe Biden’s administration would “decriminalize marijuana” and “expunge the records of those who have been convicted” during last week’s VP debate.
Between the election and third-quarter earnings season, the month of November is lining up to be the biggest month for multi-state operators (MSOs) in recent memory.
State-By-State Analysis: On Monday, Cantor Fitzgerald analyst Pablo Zuanic took a deep dive into recent state-by-state cannabis sales data to predict which MSOs will be big winners during third-quarter earnings season, which kicks off in early November.
Zuanic is tracking three prevalent U.S. cannabis trends in recent months:
- Illinois cannabis sales growth accelerated in the third quarter, up 50% sequentially compared to 20% sequential growth in the second quarter
- Easing of pandemic-related restrictions triggered strong recoveries in the Nevada and Massachusetts cannabis markets
- Sales growth slowed in medicinal marijuana markets, such as Florida, Arizona, Maryland and Ohio
How To Play It: Given the relative geographic footprints of top MSO stocks, Zuanic said the third-quarter sales trends bode well for Green Thumb Industries Inc. GTBIF and Cresco Labs Inc. CRLBF ahead of earnings season.
“Relative to guidance and consensus estimates, and triangulating with the state market data discussed above, we think Green Thumb is best positioned to beat by a hefty margin,” Zuanic said.
Green Thumb’s top four markets are Pennsylvania, Illinois, Massachusetts and Nevada, and Zuanic is predicting particularly strong numbers out of Illinois and Nevada.
On the other end of the spectrum, slowing growth in Florida is bad news for Trulieve Cannabis Corp. TCNNF, which Zuanic says will likely lag its peers in third-quarter revenue growth.
Zuanic recently named Trulieve as his top U.S. MSO stock pick followed by Green Thumb, Curaleaf Holdings Inc. CURLF and Cresco.
Benzinga’s Take: Online prediction market PredictIt suggests Biden has a 67% chance of winning the election, but investors who remember 2016 know polls and gambling markets can certainly be wrong. 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.
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