Canaccord Genuity (TSX:CF, LSE:CF) Corp released its cannabis market report indicating a 26% increase in revenue opportunities for US businesses, reaching up to $30 billion in revenue in 2022.
The report also outlines a compelling value proposition for Multi-State-Operators (MSOs) even though cannabis equities continue to face headwinds despite positive fundamental performances.
The investment bank said that 2021 is estimated to end with total state legal sales of US$24 billion. With upcoming recreational programs likely to be launched in New Jersey and New York, the total US sales for 2022 are anticipated to cross US$30 billion.
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California, Illinois, Pennsylvania, Florida, Arizona, New Jersey, Massachusetts, and Michigan are likely to see a combined revenue increase of US$4.3 billion, representing at least 70% growth of the entire US market compared to 2021 levels.
Canaccord also anticipated that by the end of this year, only 38% of total sales in existing state-legal US markets are currently being serviced by licensed operators. The analytics company predicts that this will result in an attractive long-term growth profile in the US as illicit channels continue to transition to legal platforms and new markets legislate cannabis reform.
Additionally, although the legal cannabis market is highly fragmented and sees participation from tens of thousands of operators, Canaccord said that many of the leading MSOs in the sector have already begun to compile a compelling national presence.
Using its 2022 revenue estimates, the research firm estimated that the leading MSOs like Curaleaf, Trulieve, and Verano Holdings, will realize combined revenues of US$12.4 billion in 2022. This estimates to up to 30% of total legal sales next year.
Other leading US operators are set to benefit from the anticipated rise in sales.
Planet 13 Holdings has operations in cultivation, production, and dispensary operation in Las Vegas. Canaccord has a 'Hold' rating on the stock, which is trading at C$4.69 on the Canadian Securities Exchange.
California-focused The Parent Company (OTCQX:GRAMF, NEO:GRAMU), meanwhile, has a 'Buy' rating from Canaccord. The company is California's leading vertically-integrated cannabis company combining best-in-class operations with leading voices in popular culture and social impact.
Since the highs of 2021, US cannabis equities have remained consistently under pressure with the Canaccord Genuity US Cannabis Index down below 20% year to date. The company said that a large majority of this pressure is coming from structural challenges in the equity markets given that cannabis remains an illicit Schedule 1 substance under the Controlled Substance Act.
Contact Ritika at ritika@proactiveinvestors.com