What A Biden Presidency Would Mean For Cannabis Stocks

Wayne Duggan

Democratic challenger Joe Biden is ahead of incumbent Donald Trump by 10%, according to a new general election poll from Rasmussen Reports.

While a potential Biden presidency could pose some challenges for investors, Cantor Fitzgerald analyst Pablo Zuanic said the Democratic platform is good news for U.S. cannabis stock investors.

Full Federal Legalization

The Biden campaign released a 100-page document outlining the Democratic Party platform this week, and Zuanic says there are multiple bullish takeaways for U.S. multi-state operators, or MSOs:

  1. Democrats support full federal legalization of medical marijuana.

  2. Democrats support individual states’ decisions regarding the legality of recreational marijuana.

  3. Democrats plan to decriminalize marijuana use and reschedule the drug federally.

Zuanic said a Biden victory would go a long way in pushing this marijuana agenda forward, but control of the Senate will be key.

For investors, the Democratic platform is bullish for Acreage Holdings Inc (OTC: ACRGF) given the structure of its contingent buyout deal with Canopy Growth Corp (NYSE: CGC), Zuanic explained.

Canopy is likely better positioned to be an early winner in the U.S. market than its Canadian legal producer peers.

In addition, if Democrats pass the STATES Act, Zuanic said it could open the floodgates for legalized cannabis banking services and alleviate and significantly improve the financial situation in the U.S. cannabis space.

Finally, federal legalization of medical marijuana could likely trigger a wave of consolidation, making smaller MSO’s potential buyout targets and providing opportunities for larger MSOs to benefit from gaining market share and scaling their businesses.

Republican Response?

While investors are assuming that the Democratic Party is the best path forward for marijuana legalization, Trump’s poor performance in the polls could pressure Republicans to take an aggressive approach in response.

“For now, our assumption would be they do not. But surely an outright call for full federal legalization of [recreational marijuana] would up the ante,” Zuanic wrote.

Zuanic’s top stock picks among U.S. MSOs are Overweight-rated Cresco Labs Inc. (OTC: CRLBF), Green Thumb Industries Inc. (OTC: GTBIF) and Trulieve Cannabis Corp. (OTC: TCNNF).

Benzinga’s Take

The best-case scenario for cannabis investors would be for Democrats and Republicans to go head-to-head in a battle for the marijuana vote. A November 2019 poll by Pew Research Center found that 78% of Democrats and Democratic-leaning independent voters support marijuana legalization and 55% of Republicans and Republican-leaning voters do as well.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

Related Links:
Analyst Explains Why He's Bearish On Tilray And Aurora Cannabis, Recommends MSOs
Canopy Growth Analyst Sees Increasing Cannabis Market Share, Little Stock Upside

Latest Ratings for CGC

Date

Firm

Action

From

To

Feb 2020

Stifel Nicolaus

Maintains

Buy

Jan 2020

BMO Capital

Upgrades

Market Perform

Outperform

Nov 2019

Bank of America

Upgrades

Neutral

Buy

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