The World According to G.A.R.P

U.S cannabis: growth at a reasonable price?

Daily Recap

With all eyes on the D.C dysfunction to see if Congress can kick the can a few more months—the House scheduled today’s vote at 4:20PM, I shit you not—U.S cannabis earnings continue to filter through the marketplace with varying levels of success.

The eleven U.S. plant-touching cannabis companies with BBG revenue estimates have $12.65B in aggregate enterprise value against ~$8B in est. ‘24 revenues and ~$9B in est. ‘25 revenues. This comes, of course, after most of the industry reigned in their capital expenditures to generate the free cash flow necessary to navigate the status quo.

Obviously, there are extenuating circumstances surrounding U.S cannabis investing including but not limited to eye-gouging onerous taxation and the inability to custody stocks, both of which remain frustratingly in place as we continue along this journey.

Insofar as there is real change afoot, however, the time to pay attention is now, which is why we spend so much time highlighting companies that are in the arena fighting for their life place on the right side of history.

While not every U.S. canna company put up 24% sequential growth like TerrAscend just did—more on that below—we expect Growth at A Reasonable Price (G.A.R.P) to emerge as a familiar rallying cry on the other side of normalization.

A New York Minute

A lawsuit against NY cannabis regulators that had stalled the opening of new legal weed dispensaries has been resolved, opening the door to the resumption of the long delayed rollout. The settlement, which has yet to be finalized, could allow MSOs to begin selling into wholesale channels in the coming weeks ahead of their December retail launch.

[that last bit wasn’t in the article linked below; we heard it from someone close]

Separately, NY legislators officially sent a bill to the governor that would provide tax relief to NYC marijuana businesses that are currently blocked from taking federal deductions under daddy’s nemesis, IRC 280E.

“This modification to income is appropriate because while the expenses of cannabis-related business cannot be deducted for federal purposes, New York law permits and encourages these businesses akin to any other legitimate business occurring in the State.”

Across the River

The New Jersey cannabis market is on its way to becoming a billion-dollar business. From July ‘22 through June ‘23, state dispensaries sold more than $734M in cannabis products, according to statistics from the NJ Cannabis Regulatory Commission, with most of those sales coming from adult-use ($555M+).

O-HIGH-O

The governor of Ohio met with GOP Senate and House leadership to discuss changes to a voter-approved marijuana legalization initiative that he wants to see implemented before the law takes effect next month. He later said that voters should not expect any “surprises,” and that his proposed revisions would honor the “spirit” of the reform.

Adios Ambien

A new survey of cannabis consumers with sleep issues found that most preferred to use cannabis instead of other sleep aids to help get to bed, reporting better outcomes the next morning and fewer side effects. Flower and vapes that contained THC, CBD and the terpene myrcene were particularly popular.

Farm Aid

The success of the U.S. hemp industry is dependent on the renewal of the Farm Bill, which had brought significant change for the U.S. hemp industry by descheduling commercial hemp production and eliminating hemp from the CSA. If the proposed stopgap funding bill passes, it would include a one-year extension on the 2018 Farm Bill and it would remain in place until September, 2024.

“This extension is in no way a substitute for passing a five-year Farm Bill and we remain committed to working together to get it done next year.”

Stocks & Stuff

Cannabis stocks popped to start the session, with MSOS rallying 3%, before Pavlov’s Dog did his thing and pressed the space 4% lower, before it bounced 4%, before it gave back 4%—and all of that happened before the lunch orders were even placed.

Below, we’ll dig deeper into today’s price action, share a signal we spied along the way, review the recent earnings, preview the reports still ahead, talk on a pure trade and chew through why President Biden needs to step-down pivot to U.S. cannabis.

All that and more, just scroll down.

SPY 0.00%↑ QQQ 0.00%↑ IWM 0.00%↑ MSOS 0.00%↑ PT Notional: $67M

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