Row 8451

Row ID: 8451 | Dataset Entry | Axioma AXP Content Repository

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This page contains data entry 8451 from the Axioma AXP content repository. The structured data below represents the complete record for this entry.

The ATB Take:

Amidst speculation over the timing of re-scheduling, it is easy to lose sight of the long-term investment opportunity cannabis presents. In the US, US$30bn in state-legal sales would need to more than triple to reach the value of the current market inclusive of illicit sales; in Canada, six years into legalization the market is still growing double-digits.

In "The Future of Cannabis" series, we invite investors to think about how the cannabis industry might look like years from today, and we start by using the tobacco industry as a framework for that. Were cannabis to follow tobacco's footsteps, what would this mean for valuations and business models?

We believe we would see (1) consolidation into global oligopolies (as of 2020, five tobacco companies made up 82% of cigarette sales globally, up from 43% in 2001), (2) outsourcing of cultivation to focus on manufacturing, marketing, and distribution, and (3) margin and ROl expansion (top tobacco companies increased their EBITDA margin from 17% 40 years ago to 41% in 2023).

**Assuming a tobacco-like consolidation occurs in cannabis over the next 15 years, we find that leading MOs/LPs-those handful of companies among the long-term winners--would find support for a 2024 EV/EBITDA multiple of over 40x (think about a present value EV of ~US$10b in the US and -C$420mm in Canada, and note that this excludes international markets or verticals other than cannabis).**

Our analysis reveals that Tier 1 MSOs/LPs that survive a shakeout period would stand to capture an outsized portion of the industry's long-term value like in a pareto distribution, therefore justifying an outsized valuation premium over the rest of the sector. In this instance, long-term investors should place even more emphasis on market leadership, strong fundamentals, and management teams with long-term orientation.

Part 2 of our series will draw parallels between cannabis and alcohol, and Part 3 will explore other variables and scenarios of how the global cannabis industry could evolve and where US and Canadian companies might intersect.

FieldValue
text The ATB Take: Amidst speculation over the timing of re-scheduling, it is easy to lose sight of the long-term investment opportunity cannabis presents. In the US, US$30bn in state-legal sales would need to more than triple to reach the value of the current market inclusive of illicit sales; in Canada, six years into legalization the market is still growing double-digits. In "The Future of Cannabis" series, we invite investors to think about how the cannabis industry might look like years from…
label r/wallstreetbets
dataType post
communityName r/wallstreetbets
datetime 2024-05-19
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Raw Record

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