Florida’s potential adult-use market is expected to be a big win for cannabis multistate operators. Not only do the companies expect sales increases, but stock valuations are also likely to rise.
There are currently 20 licensed cannabis operators in the state, and nine of them are publicly traded MSOs.
But before the MSOs can begin printing money, a few things still need to happen. Even though the state Supreme Court affirmed placement of the adult-use legalization measure on the November ballot, it still needs 60% of the vote to be in favor of the move.
If that happens, the program would need to be established. Assuming the state doesn’t do a hard pivot in adopting its adult-use program like New York, sales could begin in 2025.
Medical cannabis sales alone for 2023 hit $1.86 billion, according to data from Headset, up 9% year-over-year. With adult-use sales added to the mix, some estimates say annual sales for the state could top $6 billion.
High valuations
Considering cannabis stocks have endured at least two years of a bear market, any lift will be appreciated by shareholders.
In a recent report, analyst Pablo Zuanic of Zuanic & Associates wrote that he expects increased stock valuations for all of the MSOs – should everything go according to plan. His estimates include:
- Cansortium – 600% increase
- Ayr Wellness – 400% increase
- iAnthus Capital Holdings – 180% increase
- SNDL (assuming equitization of Parallel debt) 160% increase
- Trulieve Cannabis Corp. – 150% increase
- Planet 13 Holdings (VidaCann deal pending) – 120% increase
- The Cannabist Co. – 65% increase
- Cresco Labs – 40% increase
- Verano Holdings Corp. – 40% increase
- Curaleaf – 27% increase
- Green Thumb Industries – 5% increase
More stores
Zuanic also believes there could be a rush to expand the number of stores in the state if adult use gets voted in. That’s despite the fact that there are already 627 medical cannabis stores across Florida.
While that sounds like a lot, the analyst points out that that equates to 28 stores per 1 million people. By comparison, Massachusetts has 68 stores per million, and Michigan has 97 stores per million.
Zuanic wrote that these MSOs may favor buying some existing operators versus the slow slog to start from scratch. He also suggested that private operators, like Green Dragon with 37 stores and Sanctuary with 23 stores, might want to divest their Florida assets.
The big kahuna in the state, Trulieve Cannabis Corp. (OTC: TCNNF), has 134 stores. The company is also the number one in volume share for flower in the first quarter of 2024 and also the leader in extracts. With just 21% of the share of all stores, Trulieve has a 39% share in the flower business.
However, Zuanic pointed out that the volume growth is lower than some peers in the market.
The analyst also mused that Curaleaf might want to buy more stores, while MSOs currently not in the state like TerrAscend and Canopy Growth may have a fear of missing out and look to gain access to the Sunshine State as well.
Tech liftoff
The move towards adult-use legalization could also benefit ancillary businesses.
Weedmaps, for example, could get a lift as new consumers seek information on new stores. Finance companies could also get a lift from companies needing a little help to accomplish expansion goals.
Zuanic’s report mentioned New Lake Capital Partners and Chicago Atlantic Real Estate Finance as potential beneficiaries as well.
Competition
Fears that a rush to expand in the state could cause too much competition should be set aside for the time being, according to Zuanic, who thinks that it could take as long as 2-3 years for new stores to come to fruition.
In addition, while Trulieve seems to own the state, there are many counties where the company has only a small presence. Zuanic also noted that 23 counties had zero dispensaries and eight had only one or two stores.
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