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Investors Should Be Paying Close Attention To How Major Cannabis Markets Come Back Online Post Covid-19

Apr 29, 2020 • 7:42 AM EDT
6 MIN READ  •  By Michael Berger
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The COVID-19 outbreak has had a significant impact on the global travel and tourism market. We believe that it will take a couple of months (if not longer) for the market to come back to some level of normalcy and expect the pause to have a substantial impact on companies that are levered to markets that were impacted by the virus.

From New York to Las Vegas, major tourism markets have seen a considerable drop off in expectations for 2020. Only time will tell how the markets will look in 2021 and we expect to see a large number of businesses file for bankruptcy before we see a new normal.

Today, we want to cover the impact that COVID-19 has had on major cannabis markets like Las Vegas, Miami, and New York. In this article, we will highlight businesses that are levered to these major markets and will provide updates on how these companies are handling the current market environment.

Las Vegas Tourism Market Dries up for Now

Las Vegas is one of the largest tourism markets in the world and the city has been one of the hardest hit by COVID-19. Although the last month has been challenging for the Las Vegas market, several leading casino companies are working to develop a plan to re-open the city.

Prior to the COVID-19 outbreak, Las Vegas was one of the most attractive cannabis markets in the world and businesses were racking in cash from retail operations. The Las Vegas cannabis market was supported by the more than 30 million people that visit the city on an annual basis and it will take a lot of time for the market to get back to what it was.

Public companies that have significant exposure to the Las Vegas cannabis market have been under considerable pressure. We believe that many of these companies are trading at compelling valuations and have favorable risk-reward profiles. We consider the current market environment to be transitory and do not expect the new normal to last forever.

Several states are planning to reopen the economy in late April/early May and this could prove to be a major catalyst for cannabis businesses. During COVID-19, states declared cannabis to be an essential industry and we found this classification to be significant. Our readers need to be aware of the companies that have been the most impacted by the outbreak and we have highlighted some of these here: 1933 Industries, Planet 13, MedMen Enterprises,

California: LA and SF Cannabis Businesses are Feeling the Pain

California is the world’s largest cannabis market and is an opportunity that we have been bullish on. The state was one of the first to issue restrictive measures for residents and this has played an important role in its ability to limit the spread of the outbreak.

Cities like Los Angeles and San Francisco are considered to be major cannabis hubs and several leading US cannabis retailers are based in California. During the last few years, we have seen a large number of companies initially set up operations in California before expanding into other burgeoning markets.

One of the reasons we are excited about the California cannabis market is related to the delivery side of the business. Although cannabis delivery services are not legal in most US markets, COVID-19 has served as a catalyst for the vertical. The cannabis delivery market has been an area of opportunity for California cannabis businesses and we are favorable on the companies that are capitalizing on this aspect of the value chain.

Eaze is the largest cannabis delivery platform in California. The private company has benefited from the COVID-19 outbreak and we are favorable on public companies that are levered to the cannabis delivery vertical. Earlier this year, we met with Driven Delivery’s (DRVD) management team while at the Benzinga Cannabis Conference in Miami. We are impressed with the way the business has ramped up as a result of the COVID-19 outbreak and believe that it is an opportunity to be aware of.

Over the next year, we expect Driven to benefit from the increased number of consumers that are ordering cannabis through a delivery platform. This is a trend that is not expected to change in the near-term as residents are forced to stay inside. Once the stay-at-home restriction is lifted in California, we expect to see a good portion of residents take precautions and remain at home. Things will not automatically return to normal and we expect Driven Deliveries to be a beneficiary of this trend.

Florida: A Prime Spring Break Location

Prior to COVID-19, Florida’s medical cannabis market was reporting impressive growth and was an opportunity that many businesses were focused on. Although we have seen a decrease in the amount of activity in the market, we are favorable on the long-term opportunity that is associated with Florida’s cannabis market and believe that this is a market to be focused on.

From coral reefs to sandy beaches, Florida is a major tourism market. With Miami’s South Beach and Orlando’ Disneyworld, there is something for everyone in Florida and this has made the state such an attractive cannabis market.

From a business standpoint, one of the primary reasons for our bullish view on the Florida cannabis market is related to the way the state has issued a limited number of licenses. Over the long-term, this aspect of the program will play an important role in the way the market will not be saturated, and we are bullish on how this structure benefits businesses.

Leading Florida medical cannabis dispensaries are generating significant revenues and have been reporting impressive growth since the market opened. Going forward, this is a trend that we expect to become more significant as the number of medical cannabis patients in Florida continues to increase.

 

 

 

 

 

 

 

 

 

Pursuant to an agreement between StoneBridge Partners LLC and 1933 Industries we have been hired for a period of 180 days beginning January 15, 2020 and ending July 15, 2020 to publicly disseminate information about (TGIF) including on the Website and other media including Facebook and Twitter. We are being paid $5,000 per month for a period of 6 months. We own zero shares of (TGIF), which we purchased in the open market. We plan to sell the “ZERO” shares of (TGIF) that we hold during the time the Website and/or Facebook and Twitter Information recommends that investors or visitors to the website purchase without further notice to you. We may buy or sell additional shares of (TGIF) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information.

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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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