The SAFE Act Could Be 2020's Biggest Cannabis Catalyst

Cannabis investors are hoping Canada’s Cannabis 2.0 will help improve sales growth and profitability in 2020 after a disappointing 2019.

Yet the U.S. SAFE Act may be the single biggest catalyst for cannabis stocks in the coming year, Cantor Fitzgerald analyst Pablo Zuanic said in a Monday note. 

Cannabis 2.0 products such as edibles, vapes and beverages hit the shelves in Canada this week. While there’s no question the performance of these products is big fundamental news for cannabis stocks, Zuanic said all eyes are on the SAFE Act heading into 2020.

About The SAFE Act

The SAFE Act stops short of legalizing cannabis on a federal level, but it would lift the limitations on investments by banks and investment funds in cannabis companies in states where they are legal.

Following the MJBiz conference last week, Zuanic said Monday that the SAFE Act could have a chance of passing in the Republican-controlled Senate. The legislation has already made it through the Democrat-controlled House.

Cannabis could become a central part of the 2020 election season depending on how things shake out in the primaries, the analyst said. 

"While we do not think the views of the current President on the question of federal cannabis legalization will be known until the Democrats choose their candidate (i.e., if Joe Biden continues to think of cannabis as a ‘gateway drug,’ that could provide an opening for the incumbent President, in our view), we think there is a greater possibility SAFE could pass in the US than cannabis become federally legal."

For now, Zuanic is bullish on the following cannabis stocks:

• Aurora Cannabis Inc ACB: Overweight rating, CA$5.85 ($4.46) price target.
• Aphria Inc APHA: Overweight rating, CA$10.40 price target.
• OrganiGram Holdings Inc OGI: Overweight rating, CA$13.30 price target.

Benzinga’s Take

Don’t expect the Senate to take action on the SAFE Act anytime soon. It would make strategic sense for Republicans to use passage or rejection of the SAFE Act as a strategic part of election season if the need arises, depending on the political climate.

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

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