Cannabis Sector Fares Terribly in 2024 US Elections, but Market Overreacts to Long-Term Impact

The 2024 US election results weren’t great for cannabis, leading to double-digit sector stock drops. Vice President Kamala Harris, who had stated intentions to legalize recreational use nationally, lost to Donald Trump. Meanwhile, three of four state legalization referendums also failed.

Why It Matters

Amid US federal prohibition of cannabis for any use, US multistate operators, or MSOs, face challenges operating in a legal gray area. Meanwhile, it also keeps out Canadian licensed producers from directly operating in the significantly larger neighbor market. Referendums to legalize recreational use in North Dakota, South Dakota, and Florida failed to receive enough votes. Only Nebraska’s referendum to legalize medical use passed. However, we view the failures as delays to the eventual outcome of wider legalization given still-growing support. Moreover, while a Harris presidency would have been a favorable outcome, we don’t think the efforts are automatically dead, either. Trump has stated support, including for Florida’s referendum. Separately, federal efforts to reschedule continue for now.

The Bottom Line

We don’t plan to change our fair value estimates on the election outcomes alone, as we still think it’s a question of when and not if prohibitions ease. For the Canadian licensed producers, our fair value estimates for no-moat Aurora ACB (CAD 13/$9.50), Canopy CGC (CAD 10/$7.40), Cronos CRON (CAD 2.80/$2.10), and Tilray TLRY (CAD 2.70/$2) continue to put shares in fairly valued territory. For US MSOs, our fair value estimates for no-moat Curaleaf CURLF (CAD 16.50/$12) and Green Thumb GTBIF (CAD 31/$24) offer risk-adjusted upside at current prices.