Florida's Medical Cannabis Market Remains 'Underpenetrated' Versus Rivals, Analyst Says

The Florida cannabis market is "quickly consolidating" and, while sequential growth has slowed, fourth-quarter flower volumes spiked 190%, according to Cantor Fitzgerald.

The Thesis: "The state’s med market remains underpenetrated vs. other med markets (one-third AZ per cap)," analyst Pablo Zuanic wrote in the note.

Florida’s state medical program currently has 465,000 patients — about 2.2% of the state’s population. Hold that up to other states: Pennsylvania, 3%; Arizona, 4%; and Oklahoma, 7%.

"We believe the state’s vertically integrated nature (mandatory) has probably made it harder for some of the incumbents to invest in growth (especially on cultivation, besides stores), thus slowing growth relative to pent-up demand," Zuanic wrote.

Meanwhile, the Sunshine State has enjoyed a recent flurry of M&A activity. Recall the deals between Liberty Health Sciences LHSIF and Ayr Strategies AYRWF, as well as Cresco Labs CRLBF and Bluma Wellness BMWLF, Zuanic noted.

Florida could be eight times larger once it goes recreational, he added, citing its 21.5 million population and 130 million tourists per year.

What To Expect: Since Florida has no caps on stores and canopy for incumbent licensees, Zuanic says Trulieve Cannabis Corp. TCNNF is well-placed to maintain its 50%-plus share.

Among the other Florida operators with 5% share or higher is Curaleaf Holdings CURLF, which posted growth both in flower and oil in the fourth quarter, and is in the process of doubling cultivation capacity in Florida.

Of the state’s 13 active licensees — which Zuanic says is a small number for a market with $1.2 billion in sales — 10 of those licensees are part of the multi-state operators (MSOs) in more than one state.

Benzinga's Take: Cannabis ballot initiatives were successful in five states this past November: New Jersey, Montana, South Dakota, Mississippi and Arizona. In Florida, however, two separate marijuana initiatives failed to get enough signatures to make the ballot in 2020. Now, cannabis supporters are aiming for 2022.

State Attorney General Ashley Moody and Florida's GOP legislators — especially in Tallahassee — maintain that pot legalization is dangerous. Meanwhile, U.S. Rep. Matt Gaetz of Pensacola, a Republican, was among five Republicans who voted with the Democrats in the House to decriminalize pot in December.

It remains to be seen whether Florida's top pot companies will see this changing sentiment reflect on their balance sheets.