This election year, cannabis legalization will be on the ballot in the Sunshine State. On November 5, if Floridians vote “yes” on Amendment 3, they will be supporting legalizing recreational marijuana usage for adults who are at least 21 years old as long as they only possess up to three ounces. Currently, medical requirements must be met to possess marijuana in Florida. Considering Florida is the third-largest state in the U.S. by population, a change in its possession laws could be very lucrative for the marijuana industry, making cannabis stocks a winner in the near future.
While the state is still seeing growth in the number of patients with medical marijuana cards, the rate of that growth has been declining steadily since 2019. People forgo applying for a medical cannabis license for many reasons. The initial visit may be too cost-prohibitive or they may lack information on how to start the process. If access to cannabis becomes substantially easier, the number of people legally purchasing the drug may increase substantially as well.
Many investors think the cannabis industry is a risky bet as the drug is still a Schedule I controlled substance at the federal level. But right now, cannabis is legal in 24 states and the District of Columbia for recreational use, and an additional 14 states allow it for medical use. With more states legalizing the drug for recreational use every year, investors who can withstand a little bit of risk in the short term should consider getting in before the federal government inevitably rules favorably on it.
Here are three of the largest dispensaries in Florida that stand to see their cannabis stocks benefit the most if the existing restrictions on marijuana possession go up in smoke.
Trulieve (TCNNF)
Trulieve (OTCMKTS:TCNNF) is both the largest cannabis dispensary in Florida and the fourth-largest in the U.S. In Florida, it has 127 locations and is one of the most accessible dispensaries with significant brand recognition. In fact, Trulieve essentially single-handedly funded the push to get the legalization amendment on the ballot. It wouldn’t be doing that if it didn’t think it had the chance to gain substantially from a positive ruling.
While the company’s Q1 2024 results won’t be released until May 9, its fiscal year 2023 results don’t paint the prettiest picture. The company reported a net loss of $527 million for the year, 114% higher than its loss in 2022. But that’s not uncommon for a company at this stage in its growth and up against the challenges inherent in operating within the cannabis industry.
On the plus side, it did manage to beat analysts’ estimates. It also increased its footprint by 10%, adding an additional 17 dispensaries in 2023. This included its entrance into the Connecticut, Maryland, Georgia and Ohio markets. TipRanks shows a one-year target price of $16.44 which gives TCNNF a 53% upside. The rating consensus from the eight analysts covering it currently stands at a “strong buy.”
Verano Holdings (VRNOF)
MÜV is the second-largest dispensary in Florida by footprint, and is part of the parent company Verano Holding (OTCMKTS:VRNOF). Verano Holdings has 74 dispensaries in Florida and, like Trulieve, operates nationwide as well. The MÜV brand is a recognizable one in Florida, and it offers unique products like inhalers and topical patches that provide different consumption methods for patients who don’t want to traditionally smoke or ingest cannabis.
Even though Verano had a net loss in 2023, it did better than Trulieve. Whereas Trulieve more than doubled its losses, Verano managed to cut its losses in half. Revenue was up 7% year-over-year (YOY) and gross profit was up 12% in that same timeframe.
In a recent report of Verano’s performance across key states, Florida stood out as a bright spot, with an increase in sequential retail sales of 11%. This was primarily due to the opening of four new stores and an overall improvement in revenue generated at each store. If the Florida market is already supporting Verano’s bottom line so positively before the legalization vote, the company has a lot more to gain if Floridians vote yes on Amendment 3. This makes VRNOF a smart choice for investors looking at cannabis stocks.
According to TipRanks, VRNOF has a one-year target price of $8.99 which gives it a 86% upside. The rating consensus from the three analysts covering it currently stands at a “strong buy.”
Ayr Wellness (AYRWF)
Ayr Wellness (OTCMKTS:AYRWF) is the third-largest dispensary in Florida with 64 dispensaries across the state. While it also operates in other markets, its Florida stores make up 70% of its footprint. A recent rebrand throughout Florida now has it known as AYR Cannabis Dispensary in the region. It is constantly innovating its products and recently released a new premium edible line.
Its fiscal year 2023 revenue was up 10% to $463.6 million. It cut its net loss by 57% and its adjusted EBITDA was up 51% to $114 million. President and CEO David Goubert believes “2023 was a transformational year for AYR as we executed on our financial and operational goals — growing revenue, enhancing profitability and strengthening our balance sheet.” He further explained, “we completed the deferral or retirement of nearly $400 million of debt maturities and now have a clear financial runway to focus on our optimization efforts as we look to capitalize on multiple industry catalysts ahead.”
TipRanks lists the one-year target price of AYRWF at $3.83 which gives it a 55% upside. The rating consensus from the three analysts covering it currently stands at a “moderate buy.” But at this price point, it’s a good way for investors to purchase cannabis stocks without the need for too much upfront capital.
On the date of publication, Philippa Main did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.