Stifel GMP analyst Andrew Partheniou says US cannabis markets are looking better than previously expected, notably in key markets in Illinois, Pennsylvania, Massachusetts and California.
That’s good news for at least three cannabis stocks with exposure to those states, says Partheniou, who on Monday delivered a report on the state of the industry and highlighted three stocks to outperform: Terrascend (Terrascend Stock Quote, Chart, News CSE:TER), Green Thumb Industries (Green Thumb Industries Stock Quote, Chart, News CSE:GTII) and Cresco Labs (Cresco Labs Stock Quote, Chart, News CSE:CL).
Partheniou raised his 2020/2021 US industry sales forecast by about $2 billion to now between $16 and $20 billion, saying that macro data shows third quarter state markets trending ahead of previous expectations on rising wholesale pricing, especially in mature markets on the West Coast. The analyst said visibility due to COVID-19 remains impaired and thus causes for a more conservative stance on 2021, but overall, the rapid rebound in Nevada sales, the dual effect of West Coast wildfires reducing supply while demand rises and generally higher than anticipated sales growth across the country were all factors in his upsized industry expectations. Partheniou said TER, GTII and CL are all poised to outperform in their upcoming Q3 earnings.
“With IL, PA, and MA state sales coming in ~27 per cent above our previous Q3/20 forecast while we estimate CA alone could have been ~14 per cent better than we expected, we believe the companies most exposed to these strong markets could outperform in this upcoming earnings season. As a result, we raise our Q3/20 forecasts for TER, GTII and CL to be markedly higher than consensus (30 per cent, 21 per cent
and 31 per cent on EBITDA, respectively) while calling out GTII with our street-high forecasts. In addition, we raise our