In early 2024, the screens of cannabis investors lit up with a promising green glow, which signals stock prices going up and a bullish surge in cannabis stocks.
Water Tower Research (WTR) captures this momentum in its latest report, offering a concise overview of the significant gains and emerging trends shaping the cannabis market and the potential future of cannabis investments.
A Sprout of Growth in Cannabis Stocks
Cannabis stocks witnessed a remarkable upswing at the beginning of 2024, with the US cannabis MSOS ETF soaring by 13.12% and the global YOLO ETF increasing by 9.11%.
The report attributes this growth, at least partially, to positive market sentiment driven by the potential reclassification of cannabis by the DEA, in agreement with a recommendation made by the Dept. of Health and Human Services.
This reclassification could eliminate the restrictive 280E tax code affecting US-based plant-touching operators, significantly boosting the industry.
Leading Performers Sprouting Higher
The report explains certain companies have shown exceptional performance during this rally. Jushi, The Cannabist, Cresco, and AYR also experienced significant rises.
Sparkling Growth Among Cash Flow Generators
Less leveraged operators that generate consistent cash flow showed more modest increases.
The report highlights Green Thumb Industries, Verano, and MariMed, which rose by 5.40%, 8.93%, and 1.89%, respectively.
Impact of DEA’s Review
The week’s rally was further fueled by news of the DEA’s ongoing review of cannabis as a Schedule I drug shortly after the HHS recommended rescheduling to Schedule III in late August.
In the report, Jesse Redmond, WTR’s managing director for the cannabis sector, noted: “US cannabis continues to outperform Canadian and other global names due to the positive sentiment driven by the potential for the DEA to agree with the HHS’s Schedule III recommendation. This would eradicate 280E, the onerous tax code that applies to plant-touching US operators”.
Notable Earnings Report
WTR’s report also highlighted that Agrify reported a 4.98% gain this week, with a significant shift in their financials.
Year-over-year revenue decreased from $7.0 million to $3.1 million, but the gross profit turned around from a $4.1 million loss to a $1.0 million gain. A reduction in operating expenses from $27.4 million to $5.6 million, primarily due to lower general and administrative costs, contributed to this improvement.
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