On Tuesday night, the New York State Senate passed a bill to legalize recreational marijuana. The following day, Gov. Andrew Cuomo signed the bill into law. These moves happened quickly, just days after the governor and other state lawmakers announced an agreement to legalize adult-use marijuana sales in the state. This momentous event makes New York the fifteenth state in the country to legalize recreational marijuana…
This is a huge deal for the industry; New York is the second-most-populous state (behind California) to approve adult-use cannabis sales. I have a few stocks in mind, which are already active in the state, that are especially well-poised to benefit from legalization.
Who has a foothold?
Cuomo said the legislation could bring in $350 million in annual taxes and create between 30,000 and 60,000 jobs for the state. With the proposed legislation expected to have an effective tax rate of 13% on marijuana sales, that means Cuomo is anticipating nearly $2.7 billion in annual sales of adult-use marijuana.
As we’ve seen in other states, such as Illinois and Arizona, companies that already have a solid footing in the state’s medical marijuana sales stand to benefit the most, at least initially. Last year, Illinois gave existing medical cannabis companies an edge, allowing them to license existing medical marijuana stores for adult-use and then allowing them to add an additional store for recreational sales. Arizona, which is opening up to adult-use sales this year, is giving priority to companies that already have medical-marijuana licenses there.
New York has capped the number of medical marijuana businesses at 10 in the state, with each allowed four licenses. The companies with the biggest market caps in that group are Curaleaf Holdings (OTC:CURLF), Green Thumb Industries (OTC:GTBIF), and Columbia Care (OTC:CCHWF).
Curaleaf will love New York
Curaleaf’s headquarters is in neighboring Massachusetts, and the company, which has 101 retail locations in 23 states, is heavily focused on the northeast, particularly in limited-license states, which is the route New York took for medical marijuana. In its four New York medical-use dispensaries, Curaleaf said it already employs 210 people.
“New York has the potential to be one of the most vibrant cannabis markets in the U.S., and proposals to legalize adult-use need to be focused on ensuring that the state can achieve considerable tax revenue, job creation, and social equity benefits as soon as possible,” said Joe Bayern, CEO of Curaleaf, in a recent press release.
Curaleaf has been steadily growing revenue. In 2020 it reported $626.6 million in revenue, up 184% year over year. It has also been moving closer to profitability with seven consecutive quarters of positive adjusted EBITDA and said it had $144 million in adjusted EBITDA last year, up 456% over 2019.
The company’s stock is up more than 268% over the past 12 months, but has dipped about 5% in the past month, making its shares a little more tempting of a buy right now.
Columbia Care has a home-field advantage
Columbia Care is headquartered in New York City, so it may have a built-in advantage as it tries to grow business in the state. The company, which was co-founded in 2012, by current CEO Nicholas Vita, a former Goldman Sachs vice president, reported full-year 2020 revenue of $197.9 million, up 151% year over year. It also had a record adjusted EBITDA of…
Continue reading at THE MOTLEY FOOL