What's In The Cards For Cannabis MSOs In Q3? Analyst's Thoughts Ahead Of Earnings Season

With earnings season underway, investors should be closely watching top cannabis stocks over the coming weeks.

Some of the largest cannabis MSOs in the U.S. are about to publish their quarterly financial reports and Cantor Fitzgerald’s Pablo Zuanic provided third-quarter estimates for the ten companies within the group.

What’s The Main Sector Catalyst?

Considering that the MSOs ETF is down 26% over the last three month period and 51% off the 2/10 peak, “the group is looking for a positive catalyst,” Zuanic said, adding that the third-quarter earnings season is not providing such a catalyst.

On the other hand, the analyst explained in an earlier note that uplisting to major US exchanges is the main catalyst as it will generate greater liquidity and attract large institutional investors.

Without it, “the MSO group may tread water at best in the months ahead,” Zuanic highlighted.

Consolidation Continues

Zuanic expects that the larger MSOs will continue to consolidate the space and benefit, as opposed to smaller operators who will end up handicapped by the regulatory landscape-related issues, such as capital market access, high borrowing costs and restrictive licensing systems.

“The lack of compromise in DC may be hurting those the legalization sponsors intended to help in the first space.” 

3Q Preview For US MSO Group

“The state data, as well as other services (Headset), point to a softening in sales growth after a strong 2Q,” Zuanic explained, adding that most management teams have “hinted to increased price pressures in a few markets.”

Nevertheless, with legal cannabis in the US still being a nascent industry, up 22% year-over-year in the third quarter of fiscal 2021, the analyst expects sales to double from 2021 to 2024 to $44 billion, considering that more and more states are legalizing the plant.

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