Amid uncertainties surrounding sales in the latest states that have legalized marijuana and the U.S. Senate’s uncertain stance on the SAFE Act for cannabis companies, multi-state cannabis operators Jushi Holdings (JUSHF) and Charlotte's Web Holdings (OTC:CWBHF), which are trading at lofty valuations, could be susceptible to significant pullbacks in the coming months. So, considering their inadequate financials and dismal growth prospects, we think it is best to avoid these stocks now.With the states of New York, New Jersey, Virginia and New Mexico legalizing recreational marijuana this year, the U.S. cannabis industry has attracted immense investor attention. However, selling recreational marijuana products legally is possibly months away given that implementing the changed regulations and distributing licenses to dispensaries will be time consuming. While Democrats’ control of Congress and the White House has so far been a blessing for most multi-state pot producers, some could still struggle to generate substantial revenues and profit.
In fact, the Senate’s stance on the Secure and Fair Enforcement (SAFE) Banking Act, a bill aimed at supporting cannabis companies by authorizing banks to do business with them, is still not clear. While the U.S. House of Representatives has passed the bill with bipartisan support, it is unlikely that the Senate will take it up for a vote soon. Amid this uncertainty, we think it is safer to invest in cannabis companies that are already generating high revenue growth.
Multi-state cannabis operators that are trading at lofty valuations compared to their peers absent adequate financial and fundamental strength could witness significant retreats in the near term. We think Jushi Holdings Inc. (JUSHF) and Charlotte's Web Holdings, Inc. (CWBHF) have limited growth opportunities against an uncertain industry backdrop and they currently look highly overvalued.