Sit Tight And Hang On To Your Cannabis Stocks, Analyst Talks Momentum & Who Will Come Out On Top

Cantor Fitzgerald's Pablo Zuanic says the U.S. cannabis industry has great value but is in a tight and defined investable pool.

But there's hope: “We are confident about the regulatory tailwinds pushing the U.S. marijuana industry forward, taking a long-term view,” said Zuanic, however “in the near term, operators face macro pressures, limited funding opportunities, and runaway licensing in some states.” 

SAFE Banking Act’s failure to materialize: 

Zuanic said that without the SAFE Banking Act and a divided Congress, he is even more confident "of the durability, scalability, and long-term outlook of the larger and better-capitalized U.S. MSOs."

However smaller operators could be excluded and “in some cases, new licensees may not even be able to raise capital to start operations,” Zuanic said in a recent note. “Still, the question of 'investability' (we do not mean fundamentals) remains a concern, with at best a TSX listing (and increased U.S. custody services?) helping in the next 12 months. Increasingly, we believe a rescheduling scenario by 3Q24 (not before) is becoming more likely, but that may delay/entangle other reform efforts in the interim.”

Top Catalysts For Building Momentum

Zuanic believes that the following catalysts will create headlines over the next one to two years:

  • Revisions to the Farm Bill
  • Passage of The Hemp and Hemp-Derived CBD Consumer Protection and Market Stabilization Act of 2021 (HR 841).
  • U.S. MJ companies listed on the TSX
  • U.S. companies acquiring Canadian assets
  • Attempts to amend the IRS’s 280E Code
  • U.S. exchanges listing U.S. plant-touching companies
  • White House re-scheduling cannabis (or de-scheduling)
  • Attempts to reintroduce (and pass) SAFE
  • Comprehensive reform

How Will The Pie Be Divided?

Noting that the industry made significant progress in 2022, Zuanic named some of the companies that will likely take a piece of the market in the future. “20 years from now, the global legal cannabis industry could be worth $200Bn. How does the pie split? Like the tobacco/liquor/beer industries (consolidated) or the wine industry (fragmented)?

"A company with a 25% global wholesale share could generate $25Bn in sales by then ($200Bn x 0.50 markup x 25% share). If we assume 25% EBITDA margins and a 30x multiple (for a growing industry with high margins), then on an EBITDA valuation, such a company could be worth $190Bn. No company comes close to that," he said. "The two largest market cap MSOs are Curaleaf CURLF ($2.9Bn) and Green Thumb GTBIF ($2Bn); only four other cannabis companies have market caps over $1Bn; among MSOs, Trulieve TCNNF and Verano Holdings VRNO VRNOF; among Canada LPs, Tilray TLRY and Canopy Growth CGC.” 

Get your daily dose of cannabis news on Benzinga Cannabis. Don’t miss out on any important developments in the industry.

Image by El Planteo

Market News and Data brought to you by Benzinga APIs
Price Target
Posted In: Analyst ColorCannabisNewsPenny StocksSmall CapMarketsAnalyst RatingsCantor FitzgerladFarm Bill 2018HR 841IRS 280E codePablo ZuanicpremiumSAFE Banking Act
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!

The Benzinga Cannabis Capital Conference is coming to Florida

The Benzinga Cannabis Capital Conference is returning to Florida, in a new venue in Hollywood, on April 16 and 17, 2024. The two-day event at The Diplomat Beach Resort will be a chance for entrepreneurs, both large and small, to network, learn and grow. Renowned for its trendsetting abilities and influence on the future of cannabis, mark your calendars – this conference is the go-to event of the year for the cannabis world.

Get your tickets now on – Prices will increase very soon!