Cannabis legalization in New York is picking up steam.
Pablo Zuanic, an analyst at the investment bank Cantor Fitzgerald, laid out five cannabis stocks that would see a boost if New York lawmakers manage to strike a deal on legalization ahead of the April 1 budget.
If New York begins cannabis sales before neighboring New Jersey, Zuanic said companies with licenses and infrastructure in New York would be set to benefit. In a Tuesday note, he named companies to bet on: Cresco Labs, Acreage, Columbia Care, Curaleaf, and Green Thumb Industries.
These publicly traded companies have five of the ten licenses to sell and cultivate medical marijuana in New York. The other public companies that own licenses in New York are financially troubled, and one reached a deal to sell its New York assets.
Two New York licenses are owned by private companies Etain Health and Pharmacann, as Insider has reported. Zuanic expects New York to be a $5.3 billion market by 2025, meaning each license could provide a windfall.
Stocks like TerrAscend, Ayr Wellness, and Verano that have a presence in New Jersey but none yet in New York could slip if New York starts cannabis sales before New Jersey, because fewer New York residents would travel across state lines to purchase marijuana, Zuanic said.
New Jersey voted to legalize cannabis in November. After months of back-and-forth negotiation over criminal penalties, taxation, and other details, the legislation was signed into law in February. Analysts expect recreational marijuana sales to begin late this year or in the early part of 2022, as Gov. Phil Murphy has said that he expects it to take at least six to nine months to get the program started.
To be sure, legalization in New York is far from a done deal.
Gov. Andrew Cuomo said New York is "very close" on cannabis legalization in a Monday afternoon press conference, sending cannabis stocks soaring.
"I think this should've been passed years ago," Cuomo said, adding that "we have to get it done." But lawmakers still disagree on key details, and Cuomo himself is facing numerous allegations of sexual harassment and calls to resign from state lawmakers.
There are also question marks as to how the program will be rolled out, including whether the existing license holders will be "grandfathered" in as New York shifts from a medical to recreational cannabis market, and what the taxation structure would look like, Zuanic said.
For example, Massachusetts voted to legalize cannabis in 2016. Dispensaries did not open in the state until November 2018.
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