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2 cannabis stocks to benefit from New York legalization; Analyst Says ‘Buy’
Sometimes popular sentiment fuels a market boom, and nowhere is this more evident than in the legal marijuana industry. However, cannabis remains illegal in the U.S. at the federal level, making various state legalization regimes a patchwork of disconnected policies. Still, there is hope that the current Congress will be able to pursue a federal legalization bill – but before that happens, investors are watching to see which state or states will pass full legalization next. And at the top of that list is New York. BTIG analyst Camilo Lyon has followed the marijuana legalization movement in New York and sees positive developments in the future. “We are currently modeling adult use sales in NY to start in 4Q22, however, given the pace and focus that cannabis reform is being given by the state legislature, we can see our legal adult use sales schedule moving forward to the 1Q22. We estimate this would increase our presumption of NY market revenue from $ 187 million to $ 749 million, an increase of $ 562 million. More importantly, we estimate that 2023 sales would grow to $ 3.8 billion in recreational sales, that is, $ 2.8 billion more than our current schedule would suggest, “Lyon opined. To this end, Lyon chose two cannabis stocks that have already built a presence in the state of New York and could go up by more than 60% next year. After running the two tickers in the TipRanks database, we found that the rest of Street is also on board, since each bears a consensus rating of “strong buy.” Curaleaf (CURLF) We’ll start by expanding and analyzing Curaleaf. The market value of $ 10.9 billion and annual revenues of $ 670 million from this company make it the largest company cannabis in the world. Curaleaf has a wide reach, with headquarters in Massachusetts and operations in 23 states. These operations include 23 cultivation facilities, 30 processing facilities, 101 dispensaries and more than 1,800 wholesale dispensary accounts. Same as the market from can U.S. nabis is fragmented, Curaleaf posted growing revenues and earnings year after year in each quarter of 2020. Starting with $ 104 million in the first quarter, the company reached $ 240.4 million in top-tier revenue in the fourth quarter, an index 201% gain year on year (year on year). This was driven by a 242% annual gain in quarterly retail revenue, which reached $ 164.9 million, and a colossal 578% gain in wholesale revenue, which reached $ 64.4 million. The state of New York represents a small part of Curaleaf’s total business. Under current state regulations, Curaleaf has a maximum of 1 growing / processing facility in New York, along with 4 dispensary licenses, all operating for the medical cannabis market. Still, this gives Curaleaf an established footprint from which to expand if the state is legalized for recreational use. In his coverage of this inventory, Lyon of BTIG writes: “We believe that CURA’s diverse geographic presence will be the main driver of growth, supporting the 87% annual sales growth over the next two years…. It is important to note that we estimate that CURA made free cash flow positive last year and will continue to generate enough FCF over the next two years to finance investments in its broad state coverage. To this end, Lyon ranks Curaleaf a Buy, and its target price, at C $ 35 (US $ 28), suggests a 75% increase for next year. (To see Lyon’s history, click here) Wall Street appears to agree with Lyon’s bullish decision on this stock, as shown by the unanimous strong buy consensus rating based on 9 buy reviews. The stock is selling at $ 15.99 and its average target price of $ 22.26 suggests room for 39% growth by the end of the year. (See Curaleaf’s stock analysis at TipRanks) Green Thumb (GTBIF) Next comes Green Thumb, a Chicago-based medical and consumer marijuana company with a network of facilities in 12 US states. These facilities include 13 manufacturing operations and 97 retail locations. The company’s retail products include groceries, vapes and pre-rolled marijuana cigarettes, as well as CBD wellness items for the home health market. Like Curaleaf above, Green Thumb has a presence in New York, within the regulatory limits of that state. Activities include three dispensary licenses, but no cultivation facility. The company, however, has already experienced the transition from a medical-only operation to a recreational model in the state of Illinois and therefore has an organizational model if New York makes a similar legal change. Green Thumb released fourth quarter figures on Wednesday, showing higher than expected growth. Specifically, revenue grew 13% in the quarter, to $ 177.2 million, exceeding the consensus estimate of $ 166.7 million. EBITDA was also better than expected, growing 23%, to $ 65.4 million, compared to Street’s estimates of $ 58.3 million. Camilo Lyon covers Green Thumb and writes about the company and its customers in New York: “Local news reported in January that [Green Thumb] may be planning to build a distribution facility in Warwick, NY (~ 50 miles north of Manhattan). According to reports, the distribution facility would include three buildings, two with 100,000 square feet and one with 200,000 square feet in Warwick Technology Park. This news is particularly important because we believe that NY could legalize adult use this year, and [Green Thumb] investing in new distribution capacity before legalization should give you an advantage in meeting what must be an overwhelming demand for recreational customers. ”To this end, the analyst places a buy rating on this stock, and its C $ 73 ($ 58 target price suggests a potential 69% increase in one year. (To view Lyon’s history, click here) In short, Green Thumb has 8 Buy reviews, adding to the unanimous strong buy consensus rating.The stock is selling for $ 34.49 and its desired average price of $ 47 implies a 36% increase in 12 months from that level. (See Green Thumb stock analysis on TipRanks.) Ideas for trading cannabis stocks with compelling valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that gathers all the information about TipRanks shares Disclaimer: The opinions expressed in this article are exclusively for the analysts presented. The content is intended for informational purposes only. It is very important to do your own analysis before making any investment.