Despite waning investor optimism in the cannabis space, AdvisorShares CEO Noah Hamman says 2020 could be a big year for the sector, amid a greater legislative push to legalize recreational marijuana.
“It was a tough year last year,” Hamman tells Yahoo Finance’s “The First Trade.” “But I think this will be a much better year for them. You could probably still see some challenges with many of the Canadian cannabis companies -- not all of them -- they'll definitely be a few winners there. But we're really focused on the U.S. cannabis space for sure in 2020.”
Hamman points to New York Gov. Cuomo’s push to legalize cannabis in the state. Cuomo is highlighting the issue as one of his priorities for 2020. His proposal includes the formation of an Office of Cannabis Management to regulate use and the creation of a cannabis and help research center. Cuomo also notes he hopes to work with Connecticut, New Jersey and Pennsylvania to coordinate a system for legalizing adult cannabis use.
If Cuomo’s efforts are successful, New York would be the 12th state to legalize recreational pot. Projections from BDS Analytics show New York could grow to a $1.6 billion cannabis market by 2024. The governor says legalizing marijuana could bring in $300 million annually in tax revenue.
In 2019, the cannabis sector dropped 32%, according to Stifel. Analysts at Stifel say the industry’s rapid growth, in addition to now slowing opportunity to develop, is creating challenges for the sector.
And the optimism the cannabis sector saw last year following recreational legalization in Canada is diminishing. Firms are now downgrading prominent names in the space, like Aurora (ACB). Piper Sandler’s Michael Lavery dropped Aurora from a “hold” to a “sell” rating amid weaker sales. Lavery also lowered his price target on the stock from $3 to $1, roughly 60% below Aurora’s market value.
Stifel also cut its yearly revenue expectations for big players in the space, turning bearish on Canopy Growth (CGC), Aurora, Tilray (TLRY) and Cronos (CRON).
But Hamman points to two companies investors should keep an eye on.
“The biggest one that probably comes to mind in our cannabis ETF is True Leaf (TRLFF),” Hamman notes. “They've done an outstanding job moving into different states. [They’re] based out of Florida, continuing to gain market share in the U.S.”
Hamman also points to Green Thumb Industries (GTBIF), saying investors could see “good long-term growth, especially as the U.S. market expands.’