You’re reading this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news. We no longer send these by email as we did in the past, but we post this and all of the newsletters on our website here.
Friends,
Wednesday was one of the worst days ever for cannabis stocks, with the Global Cannabis Stock Index dropping 13.3%. It was driven primarily by the surprise defeat of adult-use legalization on the ballot in Florida. This required 60% of voters to approve it in order for it to pass, and most polls suggested it would pass. While I never said that it wouldn’t pass, I did warn investors about the four largest operators in Florida, all publicly-traded MSOs. They plunged yesterday:
These stocks all fell way more than the overall market, and they also fell more than the American Cannabis Operator Index, which dropped 27.6% to a new all-time low. Most of these stocks are down year-to-date now, with Trulieve actually up 38.2%. The others are all down more than 44% in 2024, with Verano, which I actually find very attractive, down over 50%.
Are these companies a buy? Well, I think Verano is, but it reported a Q3 that was weaker than expected today. I continue to think that Ayr Wellness and Curaleaf do not look attractive due to their balance sheets, while Trulieve is better than it was recently. I downgraded it at Seeking Alpha recently to Sell, and I would now be Neutral if I were to write about it again. Trulieve and Curaleaf reported disappointing Q3 financials as well.
I don’t think that Trump’s election as President is necessarily negative for cannabis stocks, but one never can tell with any politician what will happen, and this could have weighed on the sector too. I continue to view the cannabis opportunity as much more favorable than I did in the past given that rescheduling remains on track to take place in early 2025. As I have said, it is not a done deal and will be disastrous for the MSOs if 280E remains. Cannabis stocks are very cheap, with some seemingly not facing big downside risk if 280E remains.
Cannabis investors made a big mistake counting on Florida to become adult-use, and there aren’t too many folks looking to start buying cannabis stocks. So, the bad news led to a big flushing. I continue to believe that the elimination of 280E will boost cash flow for the MSOs, improve their buying of products and services from ancillary providers and strongly increase investor sentiment. The Global Cannabis Stock Index did not make a new all-time low yesterday, though it is down 7.6% year-to-date now.
New Cannabis Ventures publishes curated articles as well as exclusive news. Here is what we published this past week:
Financial Reports
Big MSO Curaleaf Q3 Revenue Declines
Scotts Miracle-Gro Cannabis Unit Q4 Revenue Falls 46%
Trulieve Q3 Revenue Growth Slows Significantly
Capital Raises
Agrify Adds $10 Million and an Interim CEO from Green Thumb Industries
Mergers and Acquisitions
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Sincerely,
Alan
