In times of regulatory uncertainty, inflation and stock market volatility, defining an investment strategy can be a wicked problem. Estimating the future of how cannabis stocks can profit from market trends requires experience, a holistic perspective, good information and an extensive network of personal relationships in the industry.
Fortunately, investors attending the upcoming Benzinga Cannabis Capital Conference in Chicago on Sept. 13-14 will have the chance to interact with the most important analyst and other researchers in the industry.
The most important analyst? That would be Vivien Azer, managing director and senior research analyst who specializes in beverages, tobacco and the cannabis sector at Cowen & Co. In 2014, Azer became the first senior Wall Street analyst to cover the emerging cannabis sector.
Prior to joining Cowen, a diversified financial services firm, Azer, who holds an MBA from NYU’s Stern School of Business, spent over nine years at Citi covering consumer staples.
Key Market Drivers: Price Drops, 'COVID Comps' and Supply-Side Issues
In a May interview with Yahoo Finance, Azer referred to the drop in prices of Canadian cannabis stocks, which she defined as a combination of underlying fundamentals, as well as a lack of regulatory change.
“We've got some sluggish fundamentals as well. We can see in our proprietary data scrapes that the COVID comps have been quite tough. There was certainly a lot of stimulus in the United States. There was incremental consumption opportunities during the pandemic, certainly in the first year of it. So, in the first quarter of 2022, we are still lapping some stay-at-home comps from last year,” Azer said.
In terms of pricing, Azer noted that at least in part, the current drop in prices constitutes a resetting of the regulatory expectations, as federal legalization might not happen in the near future.
“I think we're starting to see that from the operators. The messaging out of 1Q '22 earnings season, I think, appropriately tempered some of the enthusiasm that some of the CEOs had been expressing around the potential for regulatory change.”
She referred to the problem of over-supply in wholesale pricing. “There were a lot of flowers that were planted in legal states in 2021. And when that got harvested in October, we went into an oversupply situation. What's interesting is that with that wholesale price deflation, that is translating to lower prices at retail. And that is driving volumes higher.
“Consumers are responding to that lower pricing, in particular, against a much more inflationary backdrop for the rest of that consumer's basket. And so, we are continuing to see year over year growth in foot traffic, despite declines in pricing."
Image courtesy of Cowen & Co.
