Florida has emerged as maybe the biggest and most profitable medical hashish market in North America.
Although the state doesn’t cost tax or monitor the worth of marijuana offered, we estimate gross sales are at a $1.2 billion run fee as of November, making Florida virtually 2/3rds the dimensions of your complete Canadian market up to now.
That can assist you make the most of Florida’s huge potential, we’ve created a useful information for traders.
The information consists of:
- Current statewide gross sales and competitors tendencies
- A listing of the publicly traded Florida license holders
- Market share by firm and market share tendencies
- Our most well-liked method to spend money on Florida
The Previous and Way forward for Hashish in Florida
Medical marijuana in Florida was legalized in 2016 by way of Modification 2, which handed with an awesome 71% majority.
Since then, affected person numbers and gross sales volumes have been rising steadily, however with a restricted variety of firm’s licensed to develop and promote marijuana, there stays important unmet demand within the state.
Till April 2019 there have been solely 14 corporations allowed to function within the state.
As of October there are actually 22 licensed operators however solely 13 are energetic.
Proudly owning a license immediately is particularly engaging because it permits operators to construct model recognition and extra cultivation capability to deal with an explosion in demand that would come from leisure legalization within the state.
A ballot performed by the College of North Florida not too long ago, confirmed that leisure use of marijuana is supported by 73 % of Democratic voters, 54 % of Republican voters and 64 % of independents within the state of Florida.
Legislators are presently laying a basis for a 2020 vote to legalize the leisure use of hashish, however within the meantime there are two payments floating round that would positively impression demand.
Invoice HB 149 would uncap the variety of marijuana licenses and enhance the utmost dispensaries every license holder may construct above the present 25 location cap.
Invoice SB 212 would enable marijuana to be offered at retail services in addition to “remedy facilities”.
Gross sales and Affected person Developments
From a gross sales perspective, Florida is knocking the lights out.
Volumes offered are up 265% since January and in July gross sales spiked 60% in a single week with the legalization of flower gross sales on high of extracts.
Month-to-month Progress in Volumes Bought
The business is seeing shortages of flower as of November which tells us pricing is probably going holding up effectively and there’ll proceed to be sturdy gross sales progress as soon as the availability state of affairs is labored out.
Although affected person numbers and gross sales are rising quickly, operators are beginning to catch up, with retailer openings accelerating since Might.
Florida’s retailer rely is up 110% up to now this 12 months towards an energetic affected person rely up 64%.
This tells us competitors is rising.
Sufferers Have Extra Shops to Select From
Much less sufferers per retailer means dispensaries must compete for patrons greater than they’ve previously.
Nonetheless consumption charges have been rising in 2019 which suggests although a retailer may even see much less prospects in a day, every buyer is shopping for greater than they used to on every go to.
This enhance in consumption coincided with the legalization of hashish flower within the state telling us sufferers have been probably assembly their flower demand from the black market previous to the change.
Every day mg Consumed Per Affected person
Due to rising consumption tendencies, gross sales at dispensaries are nonetheless rising properly despite the fact that every retailer could also be shedding some prospects to not too long ago opened competitor areas.
Backside line there’s nonetheless greater than sufficient demand to go round.
Every day mg Bought Per Retailer
Traditionally the Florida market has been dominated by one giant participant (Trulieve).
Market Share (Might 2019)
Trulieve held a commanding 57% market share of all gross sales in Might 2019, however the firm’s lead has decreased barely as extra opponents start to open throughout the state.
As of November 1st, Trulieve nonetheless made up 48% of volumes with a transparent lead over the second largest participant at solely 12% of the market.
Wanting on the market share change from Might to November, Liberty Well being Sciences has been the large winner at Trulieve and Surterra’s expense.
Remember there are elements of Florida with out even one dispensary, so market share good points may very well be coming from merely a brand new retailer opening.
Market Share Change Might to November
Subsequent lets take a look at who has essentially the most environment friendly dispensaries.
Trulieve additionally comes out manner forward on this regard, promoting 30% extra per retailer than Altmed and 3 times as a lot because the business common.
Trulieve probably has a mixture of the most effective areas, the best merchandise and effectively skilled employees to ensure the shopper expertise is high notch.
Trulieve’s spectacular promote by way of probably explains why the corporate generates such spectacular margins and cashflow on a company stage.
Gross sales Per Retailer per Week
The Finest Option to Spend money on Florida
For traders who need to get forward and money in on the hashish legalization pattern, proudly owning a pure play Florida operator or one with publicity to the state is the easiest way to place your self in our view for the eventual countrywide legalization.
When you spend money on Florida you’ll be able to profit from two constructive tendencies.
- Florida sufferers eat hashish at an estimated fee of about 80 milligrams a day, pointing to extra upside in demand contemplating Canadian sufferers consumed over 100 milligrams a day within the early days of medical legalization.
- Florida has among the best regulatory environments to run a hashish enterprise. New legal guidelines opening up the market have occurred at a relatively speedy tempo and the state is understood for being very professional enterprise.
Out of the four high medical marijuana corporations in Florida, Trulieve (CNSX:TRUL), Curaleaf (CNSX:CURA), and Liberty Well being Sciences (CNSX:LHS) are publicly traded corporations whereas Surterra Wellness is privately held and backed by the inheritor to the Wrigley Chewing Gum fortune.
When selecting which inventory to personal you might have two choices:
- Personal the Florida targeted shares (Trulieve, Liberty Well being Sciences). These corporations have smaller footprints than different MSO’s so supply much less absolute upside (with their present footprints, which may change), however you acquire extra publicity to a state with among the greatest demand tendencies and least competitors in America.
- Purchase one of many giant MSO’s with a footprint in lots of states, Florida being certainly one of them. You should have diversified publicity to federal legalization and might nonetheless profit from explosive progress in Florida. Massive MSO’s require additional cash to construct out cash shedding states proper now so you’re taking extra danger with this strategy than merely proudly owning a worthwhile firm like Trulieve.
With funding markets drying up, money is king and needs to be the primary metric you think about when selecting any hashish inventory.
Choice 1 is decrease danger, however presents much less long run upside, whereas choice 2 is extra dangerous within the right here and now, however would assist you to set it and neglect it for years with doubtlessly massive outcomes.
With that mentioned, listed below are our high 5 inventory picks to make the most of Florida’s explosive progress.
Our High 5 Decisions
#1 Trulieve (CNSX:TRUL)
Essentially the most worthwhile hashish inventory in North America and a market share chief in Florida, Trulieve is palms down the #1 choice in our thoughts.
Trulieve doesn’t have to fret about working out of money which makes it engaging despite the fact that its three state footprint is smaller than friends.
You could have restricted your potential draw back whereas additionally maximizing publicity to the Florida market.
#2 Cresco Labs (CNSX:CL)
Cresco has a decrease market share than some others in Florida at solely three%, however with a footprint in additional than 10 states and good entry to capital, Cresco presents important upside to a rising U.S. hashish market.
We selected Cresco over Curaleaf for #2 as a result of Cresco is sitting on sufficient money to hold it by way of 2020 in comparison with Curaleaf which wants to boost extra money within the subsequent three months.
Cresco has the capital to develop quickly in Florida so it probably received’t keep at such a low market share for lengthy.
#three iAnthus (CNSX:IAN)
iAnthus beats out Liberty Well being Sciences as our quantity #three choose as a consequence of a a lot bigger nationwide footprint, sufficient money to outlive the present funding crunch and the same market share to Cresco Labs.
iAnthus offers you entry to the North East the place there are untapped markets like New Jersey and New York simply beginning to ramp up.
#four Liberty Well being Sciences (CNSX:LHS)
Liberty has an extended working historical past in Florida and has the second largest market share within the state. Liberty is bettering gross sales per retailer sooner than some other peer and now has the third highest gross sales per retailer.
After a current asset sale Liberty is cashed up and appears to be solely 1 / 4 or two away from cashflow profitability making future capital raises pointless.
#5 Curaleaf (CNSX:CURA)
Curaleaf has the biggest state footprint in U.S. hashish making it a robust play on federal legalization.
A 10% market share in Florida can be fairly robust and may assist outcomes whereas we await the legalization course of to march alongside.
The explanation Curaleaf wasn’t larger on our checklist is due to a low money stability. Primarily based on the corporate’s present money burn fee, we estimate it might want to borrow extra money or difficulty inventory within the subsequent three months or so.
Buyers may very well be diluted from this transaction so we might wait to personal this inventory till a capital elevate is previously.
Summing it All Up – Endurance is Key
Although we expect most of those names will generate very engaging long run returns, for now the chance within the hashish sector is to the draw back.
In a excessive progress, cash shedding business, when entry to money dries up, some gamers by no means work out tips on how to adapt and easily run out of cash.
The Canadian hashish sector, which is driving funding for the entire sector, nonetheless has a value battle to work by way of.
Buyers can begin nibbling at these shares now, however we suggest including the 5 names above to a watch checklist and ready for affirmation that the hashish business is essentially healed earlier than diving in ft first.
A splash of endurance and the best publicity shall be rewarded.