The election results are bullish for marijuana stocks.
Cannabis stock investors didn’t get the blue wave they were hoping for in the U.S. election, but all five state marijuana legalization measures on the ballot have passed. Recreational and/or medical marijuana was legalized in Arizona, Mississippi, Montana, New Jersey and South Dakota, increasing the potential geographic footprint of cannabis multistate operators, or MSOs. Unfortunately for cannabis investors, Democrats may not gain control of the Senate, potentially limiting significant federal cannabis reform. As a result, some cannabis stocks initially dropped following the election. Here are the best cannabis stocks to buy following the election, according to Cantor Fitzgerald.
Aphria (ticker: APHA)
Flower price depreciation has been a major issue for all Canadian licensed producers, or LPs. However, analyst Pablo Zuanic says Canadian LPs like Aphria could have “positive collateral benefits” from the U.S. election, assuming Joe Biden takes over the White House. Federal legalization may still be at least two years away, but decriminalization of adult-use marijuana and potential federal rescheduling of cannabis could boost Aphria and other Canadian LPs, Zuanic says. He says Aphria has multiple positive catalysts ahead in the near term, including a rise in exports. Cantor Fitzgerald has an “overweight” rating and $8.95 price target for APHA stock.
OrganiGram Holdings (OGI)
Canadian LP OrganiGram has had a brutal year in 2020. Zuanic says OrganiGram’s retail sales trends in the third quarter were relatively strong compared with other Canadian LPs. However, Hifyre cannabis sales data for October suggest OrganiGram sales were down 25% month over month compared with a 5% decline for the overall Canadian retail market. OrganiGram has disappointed investors with its sluggish revenue growth and cash burn, but Zuanic is optimistic the company will find its way to profitability and growth in the long term. Cantor Fitzgerald has an “overweight” rating and $4.07 price target for OGI stock.
Cresco Labs (CRLBF)
While Canadian cannabis stocks are struggling, U.S. multistate operators like Cresco Labs are thriving. In the second quarter, Cresco beat consensus analyst sales estimates by 30% and exceeded their earnings before interest, taxes, depreciation and amortization expectations by nearly 200%. Zuanic says Cresco’s 42% sequential sales growth in the second quarter was the best growth rate among all of Cresco’s large MSO peers. Zuanic says the Illinois market will be a major near-term growth driver for Cresco, and its Origin House acquisition should supplement its organic growth. Cantor Fitzgerald has an “overweight” rating and $16 price target for CRLBF stock.
Curaleaf Holdings (CURLF)
Curaleaf is a U.S. MSO that operates in 23 states. One of those states is New Jersey, which may represent the largest opportunity among the states that legalized recreational marijuana on Election Day. Not only will Curaleaf benefit from the New Jersey market, but Zuanic says Curaleaf will likely draw customers from neighboring Pennsylvania and New York. Curaleaf reported impressive 142% revenue growth and 180% gross profit growth year over year in the second quarter and holds a leadership position in key states. Cantor Fitzgerald has an “overweight” rating and $18 price target for CURLF stock.
Green Thumb Industries (GTBIF)
Green Thumb Industries is a U.S. MSO that operates in 12 states, including California and Florida. Zuanic says Green Thumb has the best risk profile of Cantor’s top-rated MSOs. Green Thumb has expanded its footprint in Illinois and Pennsylvania without overextending its balance sheet, it already has a sizable presence in New Jersey and Zuanic is projecting revenue will grow from $527 million in 2020 to $982 million by 2022. He also anticipates further legalization in Pennsylvania, New York, Connecticut and Maryland in coming years. Cantor Fitzgerald has an “overweight” rating and $29 price target for GTBIF stock.
Trulieve Cannabis Corp. (TCNNF)
Trulieve Cannabis is an MSO that operates primarily in Florida. Zuanic recently hosted a call with Trulieve CEO Kim Rivers. After speaking with Rivers, Zuanic says he is confident in Trulieve’s ability to maintain a dominant market share of the high-growth Florida medical marijuana market. In addition, Zuanic says Trulieve has a significant opportunity to grow its businesses in other states, including California, Massachusetts and Connecticut. Finally, he is optimistic Florida voters could legalize recreational marijuana in the 2022 midterm election. Cantor Fitzgerald has an “overweight” rating and $60 price target for TCNNF stock.
GW Pharmaceuticals (GWPH)
Unlike the other cannabis stocks on this list, GW Pharmaceuticals is a biopharmaceutical company focused on developing cannabis-based drug therapies. The company’s lead drug Epidiolex has been approved by the Food and Drug Administration for the treatment of pediatric epilepsy. Cantor analyst Charles Duncan says GW’s third-quarter Epidiolex sales exceeded his expectations. He also sees several bullish catalysts for GW through the end of 2021, including further penetration into adult patients and additional rollout in Europe. Cantor has an “overweight” rating and $165 price target for GWPH stock.
Marijuana stocks to buy after more states OK use:
— Aphria (APHA)
— OrganiGram Holdings (OGI)
— Cresco Labs (CRLBF)
— Curaleaf Holdings (CURLF)
— Green Thumb Industries (GTBIF)
— Trulieve Cannabis Corp. (TCNNF)
— GW Pharmaceuticals (GWPH)
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Update 11/06/20: This story was published at an earlier date and has been updated with new information.