The U.S. Cannabis Sector Continues To Impress From A Fundamental Perspective Despite The Share Prices Getting Crushed

Although 2021 has been a banner year for the United States (US) cannabis industry, the sector has come under consider pressure in recent months. 

We recently came across an article by MJ Biz Daily that discussed how cannabis sales in the summer were much lower when compared to last summer. The article specifically highlighted the recreational cannabis market in California, Colorado, Nevada, Oregon, and Washington. 

According to sales data from the states and Headset, a cannabis analytics firm, these states reported lower cannabis sales after the month of May. While we find the trend to be interesting, we are not concerned by declining sales numbers from these markets. 

Although cannabis sales were lower in these markets, states like Illinois, Massachusetts, Michigan and Pennsylvania are reporting impressive sales numbers and we believe the overall trend is positive. 

2021 Recreational Sales Data Remains Positive 

One of the metrics that we found to be compelling is related to the amount of recreational cannabis sales in the first quarter of the 2021. When compared to the first quarter of 2020, these five states reported very strong recreational cannabis sales growth and we highlighted the performance of each state on a comparative basis below (according to data from Headset):

1. California – cannabis sales increased by more than 40% 
2. Colorado – cannabis sales increased by almost 30% 
3. Nevada – cannabis sales increased by more than 40% 
4. Oregon – cannabis sales increased by more than 30% 
5. Washington – cannabis sales increased by more than 20% 

April was a strong month for the recreational cannabis market and sales growth in these states ranged from 10.8% to 91.5% higher (averaged a 41.9% increase in revenue). We attribute the strong sales in April to the 4/20 holiday and want to highlight the performance of these markets after April (according to data from Headset):

1. California – cannabis sales increased by almost 10% (May to October)
2. Colorado – cannabis sales fell by less than 5% (May to August)
3. Nevada – cannabis sales increased by almost 20% (May to October)
4. Oregon – cannabis sales increased by less than 2% (May to September)
5. Washington – cannabis sales fell by less than 5% (May to September)

Leading Financial Firm Finds US Valuations to be Attractive 

If the recent pressure on US multi-state operators (MSOs) is related to sales data from certain state markets, then we believe the decline is very overstated. Last week, Canaccord Genuity published a report on US cannabis companies and said that valuations have never been more attractive. We are favorable on the broker-dealer’s view on the US cannabis market and this is a vertical that we are closely following. 

If you are interested in learning more about the US cannabis market, please send an email to support@technical420.com with the subject “The US Cannabis Market” to be added to our distribution list. 

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Michael Berger is Managing Partner of StoneBridge Partners LLC. SBP continues to drive market awareness for leading firms in the cannabis industry throughout the U.S. and abroad.

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