A new report from Water Tower Research, authored by analyst Jesse Redmond, presents a compelling snapshot of the current cannabis industry landscape.
Unprecedented Surge in Cannabis Market
Since the US Department of Health and Human Services (HHS) teased potential changes to marijuana’s classification in August, multi-state operators (MSOs) have soared by an astounding 69.07%, with YOLO enjoying a solid 34.82% increase.
The surge is fueled by optimism surrounding the reclassification of cannabis to Schedule III and the potential relief from the burdensome 280E tax for US-based cannabis operators.
Leaders in the Arena
Ascend Wellness AAWH emerged as the frontrunner, boasting an impressive 25.44% surge, followed closely by MariMed MRMD with a respectable 12.14% gain.
California-based Gold Flora GRAM delivered a striking performance, skyrocketing by 67.17% this week and maintaining a strong 83.89% year-to-date increase. In contrast, The Cannabist CBSTF saw a minor setback, dipping by 12.53% for the week but still holding a healthy 17.65% year-to-date gain.
HHS Recommendation
The HHS unveiled an unredacted 252-page document on January 12th, recommending the reclassification of cannabis to Schedule III, as a result of attorney Matt Zorn’s Freedom of Information Act (FOIA) lawsuit.
A Bold and Surprising Recommendation
The report indicates that the HHS’s recommendation exceeded expectations, affirming that cannabis has a “currently accepted medical use in treatment in the United States” and a “potential for abuse less than the drugs or other substances in Schedules I and II.”
Media Uproar
The unveiling of the complete HHS recommendation sparked media frenzy. Notably, the report highlights Tilray TLRY, which has seen a surge in popularity and now ranks as one of the top three most discussed topics on the Reddit Wall Street Bets subreddit.
Looking Ahead
Per the report, the industry’s prolonged slump since February 10, 2021, due to political gridlock, could reverse. With politicians recognizing the potential of cannabis reform to mobilize and engage younger voters, coordinated efforts to push cannabis reform may gain momentum before the upcoming election.
Institutional Ownership and the Road Ahead
The report reveals that the top five US cannabis stocks have an average institutional ownership of only 9.59%, significantly lower than well-established alcohol and tobacco stocks. Doubling institutional ownership could be a pivotal boost for the industry. However, attracting institutions hinges on visible political progress, instilling the confidence needed for investment.
Photo: AI-Generated Image.
