(AYRWF), (ACRDF) – Can Past Medical Cannabis Sales Predict Rec Sales?


New Jersey is expected to start selling recreational cannabis later this year or early next year. Until then, it is not known what the combined sales of med + rec will be, but Cantor Fitzgerald’s analyst Pablo Zuanic has a rough idea.

He decided to take a look at the numbers in other states to predict what to expect from the garden state.

“Med sales can help predict Rec sales a little,” wrote Zuanic in his recent note.

He drew data on Massachusetts, Colorado, Illinois, Michigan, Massachusetts, and Arizona, which started recreational cannabis sales in late January 2021, to get a clearer picture.

What the numbers show: The “correct” multiplier “(rec / med) depends on several factors, said Zuanic. In addition to the so-called” 3As “(access, affordability and assortment), a look at the development of a medical market by a state must first be taken at the leisure start , coupled with the availability of leisure time in neighboring countries.

Here’s a look at some of the states mentioned and how their combined Reg + Med markets have grown:

  • Massachusetts: The multiplier in two years was 6x.
  • Arizona: It is expected 2-3x.
  • California: It was only 1.2x two years in “due to bureaucracy, high taxes and a large illegal market,” added Zuanic.
  • Oregon: Med was around $ 490 million in 2017 (rec had already started). In 2020, the total for recreation and medicine was $ 830 million, so that multiple here would be about twice that.
  • Washington: Medical was $ 930 million in 2017 (rec had already started). In 2020, the total profit was $ 1.11 billion, so multiples would be 1.2 times.
  • Nevada: Medical was around $ 270 million in 2017 (rec had already started). In 2020 total profit is expected to be $ 785 million, or triple that.
  • New Jersey: The size of the Rec + Med market could be 5-6x larger than that of medical 12 months of leisure.

“We are not changing our current market forecast, but this analysis could mean an upward movement in our market estimates for AZ and NJ,” added Zuanic. “Nevertheless, the medical markets in these states were at different stages of development before admission began, so that comparisons can only go so far.”

Case study: Zuniac estimates that New Jersey medical drug sales are currently between $ 270 million and $ 300 million, which is per capita sales of just $ 30, or one-fifth of Arizona’s levels.

He specifically cited the Benzinga Cannabis Capital Conference, where Ayr Wellness Inc. (OTC: AYRWF) Management said the Garden State Dispensary – which Ayr was willing to acquire – has 30,000 square feet of canopy and the state has a total of 300,000 square feet.

“If these numbers are correct and we assume that companies sell everything they make in New Jersey, it means the market is $ 300 million,” says Zuanic. “GSD was valued at $ 101 million, or 3.4 times current sales, prior to earn-outs, which means the company has $ 30 million in revenue. If they actually own 10%, it would NJ Med market is currently at a run rate of $ 300 million. “

Zuanic estimates fourth quarter 2020 sales in New Jersey at $ 68 million, or $ 272 million on an annual basis.

“That said, it could be higher if we take canopy data from colleagues,” he adds, citing that the entire New Jersey canopy could be closer to 500,000 square feet.

Curaleaf Holdings Inc. (OTCQX: CURLF) has disclosed 153,000 square feet; Verano Holdings (OTC: VRNOF) 120,000; Terrascend Corp. (OTC: TRSSF) 80,000; Columbia Care Inc. (OTC: CCHWF) 50,000; and Land stocks (OTC: ACRDF) 30,000.

(Photo courtesy of Pixabay.com)

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