The cannabis sector has a dream ticket with Kamala Harris and Tim Walz. Investors act like they haven’t even noticed. This seems like a big mistake.
The key takeaway: Cannabis stocks look buyable in the current bout of dramatic sector weakness. Cannabis investors are notoriously bipolar. Right now, they are in a dark mood. That’s usually been the best time to add to positions, especially when there are potential catalysts on the horizon like now. I outline the main ones and the possible timing, below.
A Bullish Changeup
In less than three weeks, Democrats have transformed their White House ticket from one led by a candidate with a lukewarm position on cannabis, President Joe Biden, to one where both candidates are enthusiastic reform advocates. This is a remarkable change up.
Biden opposes recreational-use legalization, and he has a history of anti-cannabis rhetoric. In contrast, Vice President Kamala Harris favors recreational-use legalization, and now she has a running mate who does too, in Tim Walz, the governor of Minnesota.
Of course, we don’t know whether they will win the race for the White House. But polls suggest they have a good shot. So do the betting sites like PredictIt, which I suggest you follow to gauge potential outcomes. Betting sites have a decent record of forecasting election outcomes.
Even if Harris and Walz don’t ultimately win, we could see two bullish pre-election developments for the sector, given their unified view on the issue and the need to spotlight issues that draw votes.
1. Cannabis could become a more high-profile topic in the presidential campaign. Polls consistently show U.S. voters support full legalization. This is true, even on the right. So, it was not a big surprise that comments last week by candidate Donald Trump put a strong bid under cannabis names.
There is a lot of misinterpretation of what Trump said. Some investors believe Trump came out in support of rescheduling cannabis to Schedule III from Schedule I (which would reduce the tax burden at cannabis companies considerably). This is not true. He was directly asked about this in a Q&A session with the media. He did not say he approves rescheduling. But he did not say no. And he made several bullish comments on cannabis in his response. He questions whether cannabis should be illegal, and he reiterated that he favors pushing decisions on cannabis legalization to the state level.
Trump’s moderately bullish comments on cannabis are not a surprise. We know cannabis reform has the potential to draw votes on the right because polls show this. Plus, acceptance of cannabis use broadened last week in both Ohio and New Hampshire. Neither of those states are bastions of liberal thought.
* Legal rec-use sales launched last week in Ohio. This is the home state of Republican vice-presidential candidate J.D. Vance.
* New Hampshire Gov. Chris Sununu (R) just signed a bill that expands medical use by allowing doctors to recommend it for whatever they see fit. Previously, the state had a laundry list of conditions.
In other words, making cannabis an issue in the presidential campaign could pull votes for both sides of the political spectrum. Positive references to reform by candidates on either side will put a bid under cannabis names. This could happen at any point between now and the election.
2. We could see progress soon on rescheduling cannabis under the Controlled Substances Act.
This administration’s Department of Health and Human Services has recommended rescheduling to the Drug Enforcement Administration (DEA) which is now mulling the issue. It closed public comment on rescheduling on July 22. Political expediency suggests a rescheduling decision would land in October, to position it closer to the election for greater impact.
Harris has openly asked the DEA to expedite rescheduling. Now that both candidates on the ticket are legalization advocates – and polls show the Democrats need every vote they can get – it seems likely their pressure on the DEA will mount. Rescheduling would help cannabis companies by neutralizing an IRS that now blocks them from deducting operating expenses against revenue.
“We remain confident that reclassification of cannabis from Schedule I to Schedule III will be complete before election day, and continue to work closely with our district peers to help bring the process across the finish line ASAP,” said Ayr Wellness (AYRWF) CEO David Goubert in his August 7 earnings call.
Curaleaf (CURLF) CEO Boris Jordan dials back the optimism a bit. He only goes so far as to say if rescheduling does happen soon, it will be timed to be news close to the election, meaning in October. Other cannabis company CEOs like Ben Kovler at Green Thumb (GTBIF) are more circumspect. He says it is impossible to know or predict what will happen with rescheduling.
The Dream Ticket
To see why Harris-Walz is a cannabis dream ticket, let’s dig into their views on marijuana. Harris not only wants full legalization, she’s promoted pardons for cannabis convictions. Walz is right there with her. The Harris-Walz ticket is the first ever where both candidates favor full legalization of cannabis for both recreational and medical use.
Since he’s the new addition to the cannabis dream team, let’s take a quick look at his record.
The most obvious indicator of his views on cannabis is that Walz aggressively campaigned for rec-use legalization as governor of Minnesota, and eventually signed a legalization bill in 2023. He also signed a bill that lets hemp businesses market cannabis drinks and food containing cannabinoids. And he approved legislation to decriminalize drug paraphernalia.
In the U.S. House of Representatives, Walz supported a version of a banking reform bill that allows banks to serve cannabis companies. He also backed bills supporting medical cannabis research for veterans, the hemp industry, and a ban on federal interference with state-level legalization.
The bottom line: It could still be months before we see any decision on rescheduling from the DEA and its parent agency, the Department of Justice. Because rescheduling is a potential vote draw, the administration would want a decision timed close to the early November election for a bigger impact. But rescheduling remains on the horizon as a potential catalyst. Given the recent moderately bullish Trump comments and the Harris-Walz dream ticket, cannabis has been elevated as a potential campaign topic does.
State-Level Catalysts
There are also several potential catalysts at the state level.
* A big one is the referendum vote in Florida in November on approval of recreational-use sales. The initiative, called Amendment 3, needs 60% of the vote, for approval. “Recent polling of likely voters showed support in the mid to upper sixties, well above the 60% threshold required to pass the adult use initiative,” said Trulieve (TCNNF) CEO Kim Rivers in the company’s August 6 earnings call. “The campaign has received almost 70 public endorsements from a wide variety of bipartisan supporters, including physicians, activists, educators, faith leaders, labor unions, law enforcement, elected officials and celebrities.”
Jordan, at Curaleaf, says rec-use approval would triple Florida sales to $6 billion annually. Note that Florida is a high-profit-margin state for cannabis companies there like Trulieve, Curaleaf, Ayr and Verano (VRNOF), among others. The state has 23 million residents and 138 million annual tourist visits.
Polls continue to show the vote will be close, typically finding that around 63%-64% of voters favor the change. Donald Trump, a Florida resident, recently said he will come out with a statement on the Florida amendment soon. If he’s in favor, it will be a meaningful catalyst for the group.
* Ohio is in the process of launching rec-use sales right now. “Given its low medical penetration rate, Ohio is a market we see reaching $2 billion over the next few years,” says Jordan, at Curaleaf.
* The New York rec-use market is finally coming around. “After a rocky start to its adult-use program, New York is showing signs of becoming a strong and healthy market for us,” says Jordan, at Curaleaf. “Actions taken by the governor’s office to support law enforcement has resulted in over 1,000 illicit operators shutting down at last count, to the direct benefit of the legal market. Assuming this trend of enforcement continues, New York is on a solid path to becoming a $5 billion market opportunity we always envisioned it would be.”
* Besides Florida, Pennsylvania could be the next big state to approve rec-use sales. Verano CEO George Archos predicts rec-use legalization could become a reality in 2025 in Pennsylvania. “We remain optimistic that adult use sales in Pennsylvania could launch in the next twelve to 24 months and the market could reach $4 billion in annual sales,” says Rivers at Trulieve.
“In Pennsylvania, there’s a lot of momentum behind bipartisan adult-use legislation and we see a path to legalization as lawmakers reconvene this fall,” says Cresco Labs (CRLBF) founder and CEO Charles Bachtell.
What to Do Now
Because cannabis stocks are so hated and it is reasonable to expect catalysts ahead, I believe it makes sense to accumulate cannabis stocks here and then patiently wait for catalysts to hit in the September-November timeframe, or earlier. Consider taking both trading positions and multiyear positions now.
Then if a catalyst creates a 15%-40% kind of rally, consider exiting trading positions and selling covered calls against multiyear positions. Consider selling calls about a month out in time and starting at two to three points above the current price, and up.
Portfolio names are: Ayr Wellness (AYRWF), Cresco Labs (CRLBF), Curaleaf (CURLF), Cronos (CRON), AdvisorShares Pure U.S. Cannabis (MSOS), AdvisorShares MSOS 2X Daily (MSOX), ETFMG Alternative Harvest (MJ), Green Thumb (GTBIF), Organigram (OGI), Tilray Brands (TLRY), Trulieve (TCNNF) and Verano (VRNOF). For simplicity, consider getting exposure via MSOS or the leveraged version, MSOX.
In a volatile sector like this, I prefer to add on weakness rather than strength. When or if we do get a catalyst, that will create a rally in which to trim positions and de-lever a bit. De-lever in this instance means trimming MSOX and putting the funds into cash or the MSOS.
Cannabis News from Around the World
Part of my core thesis for being bullish on cannabis stocks is that there continues to be tremendous cultural momentum toward cannabis reform around the world. I’m convinced cannabis stocks will not remain ignored forever.
We see evidence of this powerful cultural momentum in the changes in laws to legalize cannabis, big tobacco investments in the space, robust cannabis sales growth in states that legalize, increased cultural acceptance in the form of relaxed drug testing standards in sports leagues and the workplace, and poll results that show a growing majority of people support legalization regardless of age and party affiliation.
These trends tell us cannabis stocks are a strong contrarian buy that will turn very profitable for patient investors with a medium-term horizon. The sector is so volatile, it is easy to get shaken out of names by heightened emotional reaction to drawdowns. So, it is important to catalogue evidence of this cultural momentum. That is the purpose of this section of Cabot Cannabis Investor.
* Donald Trump ally and Florida resident Roger Stone says he will vote in favor of a referendum that would green light rec-use cannabis sales in his state, called Amendment 3.
“Based on my own experience when my dad was fighting cancer, I know cannabis has great medicinal value,” said Stone in a post on X. “Because Florida’s medicinal marijuana program that was overwhelmingly approved by Florida voters is so cumbersome, restrictive, expensive and user-unfriendly, many Floridians can still not get the help they need. That is why I will vote YES on Amendment 3.”
* Conservative Florida State Sen. Joe Gruters (R) says he will vote in favor of a state referendum that would approve rec-use sales.
“We call this state the ‘Free State of Florida’ because we don’t want overreaching government mandates impeding upon our individual rights,” he said in an op-ed piece. “I’ve worked hard as a Republican state senator, a former member of the Florida House and a past chairman of the Republican Party of Florida to make sure our freedoms are never limited, whether it’s protecting our Second Amendment rights, providing school choice or preventing a state income tax.”
Gruters also wrote: “When it comes to allowing marijuana in our state, the truth of the matter is that marijuana is already here in Florida. But recreational marijuana is here without proper regulation. The market operates in the shadows, leaving consumers vulnerable to untested and potentially dangerous products like fentanyl. Amendment 3 would change that by ensuring adult Floridians have access to marijuana that is rigorously tested and regulated. This means safer products for consumers and a significant reduction in the risks associated with the illegal market.”
He also cited job creation and tax revenue as reasons to vote for the referendum. Gruters says the state would take in $500 million a year in new tax revenue.
* The Florida Police Chiefs Association (FPCA) and the Florida Sheriffs Association (FSA) both oppose legalizing rec-use cannabis in the state. They cite possible increases in youth use, violence, impaired driving, homelessness and hospitalization linked to marijuana use.
* Ken Griffin, CEO of the Citadel investment shop, says he will donate $12 million to a Florida campaign against rec-use legalization in the state. He calls the state’s rec-use legalization referendum “a terrible plan to create the nation’s most expansive and destructive marijuana laws.”
He says Amendment 3 approval “would create a monopoly for large marijuana dispensaries and permit pot use in public and private areas throughout Florida. That will help no one other than special interests. It will hurt us all, especially through more dangerous roads, a higher risk of addiction among our youth, and an increase in crime.”
Smart & Safe Florida, which is lobbying in favor of Amendment 3, says it has raised $66 million to support the effort.
* U.S. cannabis retail sales hit an all-time high in June. The tally as of June suggests annual sales will hit $32 billion this year, says the research group LeafLink. Sales growth so far has been the strongest in New York, Maryland, Florida, Michigan and Missouri. LeafLink predicts sales will grow by $7 billion over the next two years and hit an annual rate of $50 billion by 2030.
* North Dakota has given the green light to a referendum offering voters the chance to weigh in on rec-use legalize this fall. A recent poll found that 57% of North Dakota voters are likely to oppose the measure. Voters rejected a rec-use legalization measure two years ago. Medical-use sales are permitted in the state.
* Voters in Bastrop, Texas, will have the chance to vote in cannabis decriminalization in this fall’s election. The city joins Dallas and Lockhart in offering a vote on decriminalization. So far, voters in Austin, San Marcos, Killeen, Elgin and Denton have approved similar measures.
* A recent poll found that two-thirds of Americans think cannabis use should not disqualify athletes from being in the Olympics. The poll was carried out for the Boca Recovery Center, in New Jersey. The results are in line with an emerging trend in sports. The National Collegiate Athletic Association (NCAA) and the Ultimate Fighting Championship (UFC) recently removed cannabis from banned substances lists.
* Police found cannabis contaminated with fentanyl during a raid on an unlicensed Norwalk, Connecticut smoke shop in early August. “Many of the marijuana products seized during the search tested positive for the presence of fentanyl,” said the Norwalk Police Department. The potential for product contamination on the illicit market is one reason consumers shop at licensed stores.
* Teen cannabis use has fallen during the past ten years even as many states approved legalization, says a study by the Centers for Disease Control and Prevention. The proportion of high-school students saying they used cannabis in the past month fell to 17% last year, from 23% in 2013. Cannabis reform opponents often argue legalization increases teen use. The study is carried out every two years.
* Senate Majority Leader Chuck Schumer (D-NY) and Sens. Cory Booker (D-NJ) and Ron Wyden (D-OR) recently wrote a letter to the Drug Enforcement Administration (DEA) telling it to promptly finalize a rule to reschedule cannabis to Schedule III to Schedule I under the Controlled Substances Act. The change would significantly lighten the tax burden on cannabis companies.
Company News
Ayr Wellness (AYRWF)
Ayr Wellness reported a weak second quarter on August 7, but it guided for stronger growth in the second half, citing the launch of the recreational-use market in Ohio and new store openings in Florida. CEO David Goubert was also bullish on rescheduling, predicting it will happen before the elections.
Revenue came in at $117.31 million up just 0.5% year over year. Gross profit fell 16.6% to $47.2 million due to a spike in costs. Operating loss widened to $7.7 million from $4.6 million. Ayr reported a loss of 34 cents per share compared to 41 cents the year before. The company cited wholesale pricing pressure, tighter consumer spending due to inflation, and investment in cultivation and production in Florida.
On the bright side, Ayr is well positioned in growth markets since 77 of Ayr’s 93 stores are in Ohio (rec-use sales just launched), Florida (the state votes on rec-use approval in November), and Pennsylvania (aggressively circling legalization of rec-use sales). “Ayr is more levered to these three markets than any other MSO, and we plan to be ready for this opportunity,” said the CEO.
Outlook
“Despite the near-term setbacks, we are well positioned for growth and margin expansion in the second half of 2024,” said Goubert. AYR expects third-quarter revenue growth in the low- to mid-single-digits range compared to Q2, due to Ohio’s rec-use launch. The CEO also cited the planned opening of a Connecticut store, two new Illinois stores opened in June and July, the addition of five stores in Florida in the second half of the year and wholesale sales growth. AYR expects positive GAAP operating cash flow and positive free cash flow for 2024, if 280E tax liabilities go away because of rescheduling.
Longer term, the company is developing its first indoor grow site in Florida, which should boost margins. It should come online in Q2 2025.
Cresco Labs (CRLBF)
Cresco reported weak sales for the second quarter. But it is cutting costs and tax payments, so cash flow and leverage ratios are improving. Cresco also remains well positioned for upcoming legalization of recreational-use sales in several states.
Cresco reported a 6.8% decline in revenue for the second quarter to $184.4 million from $198 million the year before. It cited exits from the Maryland and Arizona markets and downsizing in California. The company also took a $61 million charge related to tax liability adjustments. It posted a net loss of $51.2 million or 16 cents a share, compared to loss of $43.5 million or twelve cents a share the year before.
On the bright side, Cresco cut costs, which boosted EBITDA and cash flow. The company cut $34 million in annualized adjusted overhead. This helped boost adjusted EBITDA by $13 million to $54 million. Adjusted gross profit rose to $96.7 million or 52.4%, from $92.6 million and 46.8% the year before. The company reduced its leverage ratio to 2.6 times adjusted EBITDA in the second quarter from 3.7 times the year before.
Cresco generated $18 million in operating cash flow in Q2 and $11 million in free cash flow. For the first half of the year, operating cash flow rose $32.4 million to $53.6 million and free cash flow was up $60.2 million to $44 million.
Cresco is joining the cannabis sector tax revolt by challenging the validity IRS 280E which blocks the deduction of operating expenses against the sale of Schedule I substances like cannabis. This will save the company $70 million a year near term. It is also filing claims to retrieve 280E-related taxes for 2020 through 2022. Many cannabis companies are challenging the 280E tax, but it remains to be seen whether the IRS will push back on this strategy.
Cresco has five stores in Ohio, 17 stores in Pennsylvania and 33 stores in Florida out of a total of 72 stores. It is well positioned to benefit from the legalization of recreational-use sales in these three states. Ohio just launched rec-use sales, and rec-use legalization could happen in Pennsylvania and Florida within the next year.
Cronos (CRON)
Cronos posted spectacular second-quarter sales growth of 46% to $27.8 million. The company cited higher cannabis flower and extract sales in Canada, higher cannabis flower sales in Israel, and sales growth in Germany and the United Kingdom.
CEO Mike Gorenstein also cited crackdowns in Canada on competing cannabis companies trying to stay afloat by dodging taxes and fudging THC concentration levels in their product by shopping around for favorable lab testing. He said his company now benefits from a shortage of high-quality “desirable” flower in Canada.
Gross profits nearly doubled to $6.3 million. Adjusted EBITDA was in the red at $11.1 million, but that was a $4.9 million improvement from the same quarter a year ago due to marketing and overhead cost cuts.
Despite the robust sales growth, the company managed to post wider losses at $8.7 million from $5.7 million the year before, driven by an impairment loss on investments. Cronos reported a loss of two cents per share compared to a penny a share the year before. Cronos closed the quarter with its cash war chest intact at $848 million.
Curaleaf (CURLF)
Curaleaf reported second-quarter revenue of $342 million on August 7, a 2% year-over-year gain. Adjusted gross margin was 48%, an increase of 2.5 percentage points, and adjusted gross profit was $163.1 million. The company reported a six cent per share loss compared to a ten cent per share loss the year before. It generated operating cash flow from continuing operations of $30 million and $6 million in free cash flow. Curaleaf ended the quarter with $89 million of cash.
The revenue gains were supported in part by the April 22 purchase of Northern Green, a Canadian cannabis supplier whose product is certified for sale in Europe. Wholesale and international growth was strong, but retail sales declined. Wholesale revenue increased 31% to $77 million. International revenue increased 78% to $25.2 million. Retail revenue fell 4% to $265 million. Price compression in Arizona and Florida was partly to blame.
In June the company announced the launch of two hemp-derived THC product lines: Select edibles and Select Zero Proof seltzers.
Joining the tax revolt spreading through the cannabis sector, Curaleaf has decided that IRS rule 280E does not apply. It will now cut its tax bill by deducting operating expenses, which is technically barred under 280E. Curaleaf will file amended federal and state income tax returns with refund claims for 2020 through 2022. For 2023 and beyond it will self-exempt from 280E and pay lower taxes as result. This assumes the IRS ignores the tax revolt, which is by no means a given.
Outlook
Curaleaf expects growth to pick up in the second half of the year. It expects full-year revenue growth in the mid-single-digit range.
Ahead of possible legalization of rec use in Florida, the company is tripling indoor cultivation capacity and expanding its store count to 85 in the state by next May. That’s probably when rec use would launch if Florida voters approve it in November, says CEO Boris Jordan.
Green Thumb Industries (GTBIF)
Green Thumb reported second-quarter revenue of $280 million, an increase of 11% compared to the same quarter a year ago.
Revenue growth was driven by increased retail sales and the addition of 11 RISE stores. Comparable sales (stores open at least 12 months) increased 2.3%. The company experienced continued price compression.
Gross profit was $150.5 million or 53.7% of revenue compared to $125.3 million or 49.6% of revenue the year before. It reported adjusted EBITDA of $94 million, and $20 million in operating cash flow. Net income was $20.7 million or $0.09 per share, compared to $13.4 million and $0.05 per share. Cash at the end of the quarter was $196 million.
The company bought back 1.6 million shares for $20 million. It has $27 million left in its buyback plan.
Unlike many other cannabis companies, Green Thumb is playing it safe on taxes. It is continuing to follow IRS Rule 280E, which means it does not deduct operating expenses. “On June 28, the IRS issued a statement that made it clear that cannabis companies were obligated to pay taxes under 280E while cannabis remains a schedule one controlled substance,” cautioned CEO Ben Kovler.
The company has been investing to expand in Florida and Connecticut. Looking ahead to the rest of the year, it will invest to expand in Florida, Nevada, Minnesota, Pennsylvania and Virginia. Most of those states may soon launch rec-use sales.
Organigram (OGI)
Canadian cannabis company Organigram posted revenue of $41.1 million for the second quarter on August 13, an increase of 25% over the prior year. Adjusted gross margin was $14.6 million or 36%, compared to $6.1 million and 19% the year before. Adjusted EBITDA came in at $3.5 million compared to a negative $2.9 million. Organigram posted net income of $2.8 million, compared to a loss of $213.5 million. The company has a cash position of $173 million thanks in part to ongoing investments from its partner British American Tobacco (BTI).
Organigram continued to hold the number one position in milled flower, hash and pure CBD gummies in Canada. Organigram established a European foothold during the quarter with a strategic investment in the German cannabis supplier Sanity Group. Sanity Group has a broad distribution network. It collaborates with over 2,000 pharmacies and 5,000 physicians. Organigram also signed two new supply agreements in Australia and the U.K.
CEO Beena Goldenberg said demand in Germany is so strong suppliers are having trouble keeping up. Germany recently removed cannabis from its narcotics list, which makes it easier for doctors to recommend it.
Trulieve Cannabis (TCNNF)
Trulieve on August 6 reported an 8% year-over-year gain in second-quarter sales to $303 million. The gains were driven by higher retail traffic and increased wholesale revenue. Gross margin came in at 60% and gross profit was $182 million, a 28% gain over the prior year. The company reported EBITDA of $88 million. Trulieve generated cash flow from operations of $71 million and free cash flow of $45 million.
The company reported a net loss of $12 million or four cents a share, compared to $404 million or $1.80 a share the year before. Cash at quarter end was $356 million.
Trulieve was one of the first companies to challenge IRS rule 280E, which bars the deduction of operating expenses for sales of Schedule I substances like cannabis. It filed amended returns for tax years 2019 through 2021, and so far, it has received refunds of $115 million, including $2 million in the second quarter.
Outlook
The company guided for third-quarter sale growth in the mid-single-digit range, year over year. The growth will come from new store openings and the Ohio rec-use launch, offset by seasonal headwinds in Arizona and Florida. It increased its full-year operating cash flow projection to $250 million. It expects full-year capital spending of $100 million. The company should add 25 stores this year. It has opened 12 so far. Trulieve now operates 206 stores. It has been aggressively opening stores in Florida, and 78% of its stores are located there. Trulieve is clearly the biggest play on Florida voter approval of rec-use sales, which is on the November ballot.
Verano (VRNOF)
Verano on August 7 reported second-quarter sales of $222 million, a decrease of 5% compared to the year before.
The decline was driven by tougher competition in New Jersey as a slew of new stores opened there. The damage in New Jersey was offset by increases in Maryland retail and wholesale sales due to the July 2023 launch of recreational-use cannabis there, and a store opening in Connecticut.
Gross profit came in at $114 million or 51% of revenue, down from $115 million or 49% of revenue for the second quarter of 2023. Adjusted EBITDA was $71 million. Operating cash flow was $8 million. The company reported a net loss of $22 million vs. a $13 million loss the year before. The increase was driven by a non-cash loss linked to a $50 million debt prepayment and a slight increase in overhead expenses.
Verano finished the quarter with $130 million in cash, some of which it will use in a new share buyback program. Remarkably, the cannabis sector has transformed from one with bankruptcy risk to a group where companies have enough extra cash to buy back stock. Green Thumb has also launched a share buyback program. These programs are a sign of confidence and financial strength, and a bullish signal at these two companies.
So far, also like Green Thumb, Verano is not joining the cannabis sector tax revolt against the IRS. It is complying with rule 280E and it plans to continue this more conservative approach.
The company increased its Florida presence to 77 stores in Q2, or over half its store count, and it opened a store in Connecticut. This pushed capital spending to $19 million.
After the quarter, Verano opened a store in Pennsylvania. It also entered into an agreement with The Cannabist Company to buy its production facility and six stores in Virginia, and three cultivation facilities plus eight stores in Arizona. Verano is taking advantage of suppressed valuations in the space, as extreme negative investor sentiment continues.
The Cannabist deal and the store openings are part of an overall strategy of positioning ahead of expected rec-use approval in Florida, Pennsylvania, and Virginia.
“We believe there’s a strong possibility that Virginia could launch an adult use program in 2026,” said founder and CEO George Archos in the earnings call. BDSA estimates 2027 Virginia sales will hit $430 million.
Archos says rec-use approval in Florida could bring his company an extra $300 million to $450 million a year. Florida is the market that produces the highest profit margins for Verano. “We see Florida easily becoming one of the largest markets in the U.S., especially with its massive tourism industry, which welcomed 140 million tourists in 2023 alone,” said Archos.
Verano has 142 dispensaries and 13 production facilities in 13 states. The Cannabist deal would take the count to 150 stores in 14 states.
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