Cannabis stocks have made a big run since the U.S. election in November. However, Cantor Fitzgerald analyst Pablo Zuanic says the spike in coronavirus cases has created significant near-term risk for multi-state operators.
Shutdowns Imminent? The vaccine rollouts that began this week are good news for MSOs in the longer term, but most Americans will not get vaccinated until at least spring or summer of 2021. In the meantime, dispensaries could be at risk of state shutdowns, Zuanic says.
“At this stage, we would be concerned about new restrictions in NV and MA, and even PA and CO (less so in AZ and FL given Republican governors),” he wrote in a note.
Positive coronavirus test ratios are three times higher than the national average in Colorado, Pennsylvania and Nevada. He said trends are particularly troubling in Pennsylvania, where positive test ratios have spiked from 5% on Sept. 1 to 34% in mid-December.
Impacted Stocks: MSOs with exposure to Nevada include Acreage Holdings Inc. ACRHF, Curaleaf Holdings Inc. CURLF and Green Thumb Industries Inc. GTBIF.
Zuanic has said Green Thumb, Cresco Labs Inc. CRLBF and Curaleaf are among the MSOs with the most exposure to the Pennsylvania market.
Coronavirus-related dispensary shutdowns, such as the ones Massachusetts imposed back in April, could be devastating to local cannabis businesses. The good news for MSO investors is that most other states with legalized cannabis have coronavirus positive test ratios at or below the national average.
Benzinga’s Take: Shares of MSOs have boomed since the election due to the passage of several state ballot measures and a victory for President-elect Joe Biden.
Large-scale dispensary shutdowns could completely derail that near-term momentum, so MSO investors should continue to monitor the situation closely.
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