Investors searching for a catalyst to pull cannabis stocks out of this 7-month bear market should look to New York. New York Governor Andrew Cuomo’s recent resignation could be a solid catalyst for the U.S. cannabis industry.
New York voted to legalize recreational cannabis back in March of 2021. The process to get the market up and running had become stalled after Cuomo became embroiled in a dispute with the NY Senate.
Because of this dispute, Cuomo failed to appoint key positions required to create a regulatory structure for the New York cannabis industry to launch. This is a serious logjam that needs to be cleared for the industry to get off the ground.
Now, Cuomo is out and lieutenant governor Kathy Hochul has stepped in as his replacement. Hochul has vowed to unclog Cuomo’s political gridlock on cannabis.
This is good news for the New York cannabis market. If Hochul can get the job done, she will unlock one of the largest cannabis markets in the U.S.
New York Would Be One of the Largest Cannabis Markets in the World
New York is expected to grow into one of the largest cannabis markets in the world. In a recent report, authors Parrott and Mattingly predict that annual cannabis sales could approach $4 billion by the end of the decade.
Here are some more data from the report:
- Annual retail sales of adult-use marijuana are projected to rise from $566 million in fiscal year 2023 — when legal sales would likely first be authorized if approved this year — to $2.6 billion in 2027 and could reach $3.9 billion by 2032.
- Legal recreational marijuana under Cuomo’s proposal may bring in as much as $159 million in state excise and sales tax revenue by 2023, climbing up to $765 million in 2027 as current users are drawn towards the legal retail market.
- Every $1 billion in recreational cannabis would create an estimated 19,400 jobs in cultivation
- Adult-use marijuana sales will add an estimated $6 billion in economic output in New York by fiscal year 2027.
As you can see, New York should become a cannabis powerhouse. There is one early industry leader that is uniquely positioned to benefit when New York goes legal.
$8 Billion Juggernaut is Looking to Capture New York
Curaleaf Holdings (CSE: CURL, OTC: CURLF) is one of the largest cannabis companies in the U.S. with a market cap of $8 billion. Curaleaf operates in 23 states, owns 101 local dispensaries, 22 cultivation centers, 30 processing sites, and has a patient list of more than 350,000.
Curaleaf is a broad play on the U.S. cannabis industry, but the company has a strong focus on the Northeast, with medical dispensaries in New Jersey and Pennsylvania and recreational dispensaries in Massachusetts.
Within the region, Curaleaf has a strong and growing presence in New York.
- Curaleaf already operates four medical dispensaries in New York.
- In early September, Curaleaf announced the launching of its medical cannabis brand called Select into New York.
The early presence in New York’s nascent medical cannabis industry provides an ideal foundation for Curaleaf to expand if New York legalizes recreational cannabis.
Medical cannabis dispensary owners are usually the first to receive permits to sell recreational cannabis. I see a high probability of this happening in New York and that would place Curaleaf in an ideal position to capture New York’s recreational market.
In the meantime, Curaleaf is already crushing it with incredible sales growth. Second-quarter revenue came in at $312 million, up 166% from last year.
Curaleaf Shares Down 35% from the 52-Week High
Despite the impressive sales growth, Curaleaf has been trapped in a bear market with the broader cannabis sector for the last seven months. As it stands, Curaleaf shares are down 35% from the 52-week high.
Looking forward, I expect Curaleaf to recover and I view this weakness as an opportunity to buy low while Curaleaf shares are out of favor.
*Author Michael Vodicka owns shares of Curaleaf Holdings.
About the Author & Cannabis Stock Trades
Michael Vodicka is an equity analyst with more than 20 years of experience trading and investing. His research has been featured in some of the industry’s most respected publications. He has been investing and leading investors in the cannabis sector since 2013.