A Sign of Trouble for the MSOs

You’re reading this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news.

Friends,

Two weeks ago, we discussed how the MSOs have plunged. They ended February a bit lower than they were then, as we detailed in the article linked below that we published today.

Even after the big pullback in February of 9.2%, the New Cannabis Ventures American Cannabis Operator Index was still up 27.2% year-to-date through the end of February. This big rally is on top of the rally in 2023 of 7.6%. So, through the end of February, the index gained 36.9% from the end of 2022. The NCV Global Cannabis Stock Index has declined 11.9% during that same period of time.

While MSO stocks may seem like they are in a bull market with the gains over the past 14 months, they remain in a bear market of over 3 years:

We have discussed the reason for the excitement that has created a potential bottom: potential rescheduling of cannabis. In late August, the Department of Health & Human Services recommended that the DEA move cannabis from Schedule 1 to Schedule 3. In our first newsletter of September, we weighed in on the topic, suggesting that we had concerns with the outcome and its timing. Six months later, there is still no timeline, and the outcome remains uncertain.

This week, the Q4 earnings season for the MSOs began, with three of the largest ones providing updates. Two of the reports were better than the analysts had projected. The other one was in line with the outlook, but the company, Verano Holdings, provided very weak guidance. The stock plunged on very heavy volume.

We see the poor reaction to “good news” at GTI and Trulieve as very concerning. Both stocks actually fell on Thursday. Of course, they are up a lot still year-to-date and over the past year, but investors should worry in our view about the lack of new buyers.

While we are cautious on American cannabis companies, this hasn’t been the case at lower prices. When they were pummelled in October, we discussed that the MSOs were more attractive. The index was at 15.65 then, and it is now 24.7% higher.

Rescheduling cannabis could be a great thing for the cannabis industry. In late 2022, we pointed to two potential cannabis catalysts, and one of those, the elimination of 280E taxation, could happen if the proposed rescheduling takes place. Our issue is that too many traders and investors have already incorporated it, and it may not happen.

This week’s newsletter is sponsored by Full Moon Investments

New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most interesting business content from this week:

Exclusive News

Global Cannabis Stock Index Slips in February

It’s Time For Cannabis Companies To Report Financial Updates

Financial Reports

GTI Posts Better-Than-Expected Q4

Trulieve Beats Expectations in Q4

Verano Q4 Revenue Declines 1% Sequentially

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Sincerely,

Alan & Joel

The NCV Newswire by New Cannabis Ventures aims to curate high quality content and information about leading cannabis companies to help our readers filter out the noise and to stay on top of the most important cannabis business news. The NCV Newswire is hand-curated by an editor and not automated in anyway. Have a confidential news tip? Get in touch.