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3 High Growth U.S. Cannabis Markets Investors Need To Have On Their Radar

Jun 23, 2020 • 7:13 AM EDT
4 MIN READ  •  By Michael Berger
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The cannabis industry has been a beneficiary of the COVID-19 pandemic as consumers have been purchasing more cannabis than prior to the outbreak. Several states still have restrictive policies in place for restaurants, bars, gyms, and shopping malls. The closures and the limitations have made it easier for people to stay inside and this is a trend that we expect will benefit the cannabis industry over the next year.

In 2018, California became a hotbed for activity after the state legalized recreational cannabis and this is a market that we have been highly focused on. In 2019, states like Illinois and Michigan passed legislation to legalize recreational cannabis and these are markets that we are excited about.

Although we tend to prefer state markets that have legalized recreational cannabis, we are bullish on markets that are moving in that direction and that are flying under the radar. States like Florida and Pennsylvania represent major growth markets and we expect the legalization of recreational cannabis to support growth on a going forward basis.

Today, we want to highlight 3 US markets that are gaining traction and present attractive growth opportunities.

Florida: A Hotbed of Cannabis Activity

Florida is one of the largest medical cannabis markets in the US and is an opportunity that we are bullish on. Over the long term, the state will benefit from having a substantial population that is over the age of 60 and this should continue to support the medical side of the business.

Once recreational cannabis is legalized in Florida, we expect to see a massive spike in the amount of cannabis that is sold on a daily basis. One of the reasons we are favorable about the Florida market is due to how it is structured. The state has issued only a limited number of cannabis licenses and we are favorable on how this benefits the operator.

Another reason we are excited about the Florida market is due the high barriers of entry that are associated with it. Companies that have been granted medical cannabis licenses must meet specific criteria to be approved and this has provided such businesses with a significant first mover advantage on the Florida market.

In the near future, we expect to see recreational cannabis legalized in Florida and this would prove to be a massive catalyst for the companies that are levered to it. We consider Florida to be an attractive cannabis market over the long term and will monitor how the industry advances from here.

Pennsylvania: A Cannabis Market to be Aware of

Pennsylvania is another medical cannabis market that is gaining traction and is an opportunity that we are excited about. Like Florida, the state has issued only a limited number of medical cannabis licenses and we are favorable on the demand that we are seeing from consumers in the market.

In late 2019, Pennsylvania Governor Tom Wolfe reported to be in favor of legalizing recreational cannabis, and this represents a major step forward for the state. Governor Wolfe believes that the legalization of recreational cannabis could create a more than $1 billion market, and this would benefit the companies that are focused on this opportunity.

Jushi Holdings Inc. (JUSH.CN) (JUSHF) has been highly focused on the Pennsylvania cannabis market and has been executing on initiatives that will make the company a major player in the state. Jushi is highly focused on states that offer a limited number of licenses and we are favorable on this structure. During the last year, Jushi has executed on several high-growth projects and we are bullish on how the story has advanced since then.

Illinois: A Recreational Market that is Gaining Traction

Illinois has been one of the most surprising markets and we are impressed with the performance of the recreational cannabis market so far. The performance of the recreational cannabis sector has brought about an increased number of acquisitions of cannabis assets based in Illinois and this is a trend that we find to be significant.

Over the next year, we expect the Illinois recreational cannabis market to continue to record impressive growth. One of the reasons we expect this to happen is due to the amount of construction that is taking place. Companies are working tirelessly on the buildout of retail outlets, cultivation assets, and processing assets in order to grab a larger piece of market share.

Going forward, we expect Illinois’ recreational cannabis market to continue to exceed expectations and will monitor how the companies that are operating in the state are performing. In the near term, we expect to see some of the largest cannabis retailers in the US acquire assets that are levered to Illinois and believe that our readers need to be aware of this opportunity.

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Authored By

Michael Berger

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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