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  1. Home
  2. / Investing
  3. / Stocks

Cannabis Sales Are Recovering From Covid-19, but Just How Much Is Debatable

The available data don't paint a clear picture of the extent of the rebound in sales in different states.
By DEBRA BORCHARDT
Oct 08, 2020 | 09:30 AM EDT
Stocks quotes in this article: PLNHF

Even though cannabis sellers were deemed an essential business by many states, many cannabis companies were hurt during the spring with the onset of Covid-19. Some states such as Massachusetts didn't allow adult-use stores to remain open, while other states pivoted to delivery and curbside service. As these restrictions began to lift, the businesses also began to recover. 

Canaccord Genuity analyst Bobby Burleson released a report noting the solid growth in cannabis sales according to point-of-sale (POS) data from BDSA. However, the actual figures in some states, while showing signs of increasing sales, aren't quite as rosy as BDSA's data.

The August POS data for Arizona, California, Colorado, Nevada and Oregon are up 29% year over year. The report specifically singles out Arizona and Nevada as seeing sales increase the most, with Arizona sales up 46% year over year and Nevada up 34%. However, keep in mind these are only the companies that BDSA is working with and not total state numbers, so the numbers can be a little misleading.

For example, the state of Arizona only publishes the amounts sold and not sales figures. According to the state's published information, it sold 14,745 pounds in August 2019 and 18,516 pounds in August 2020. That's a year-over-year increase of 22%. The Canaccord report says sales were up 46% year over year, but declined 2% from July. This is somewhat in check with the state's report of a decline of 0.7% from July to August. The report said flower sales gained the most at 48%, but vape sales lost share by a smidge. Vape sales were 24% of sales in August 2019, but dropped to 23% in 2020.

In Nevada, Canaccord notes that sales declined in the spring as the stores were closed due to Covid-19, but then goes on to say that sales increased year over year by 34% and 2% month over month. However, a review of sales data from the state of Nevada shows a different story. It reported July 2019 taxable sales of $59.9 million while June 2020 taxable sales were $61.3 million, which is only a 2% increase - not even close to the 34% cited by Canaccord. The report does note the weakness in the spring as a result of Covid and the decline in tourism. 

One company that is transparent with its numbers is Planet 13 Holdings (PLNHF) . It has a superstore in Las Vegas and was very successful prior to the pandemic. It reported a significant rebound in sales from the second quarter's $10.8 million to the third quarter's sales of $22.8 million. Planet 13 said the store served 1,625 customers per day in-store with an average ticket of roughly $124. In June 2019, the store was serving more than 2,000 customers a day, so there is clearly a decline in the store traffic as tourism has yet to return to the old levels. The average ticket in June 2019 was $88, so the ticket size is increasing even if the traffic is lower.

Another notable data point from the Canaccord report is that vape sales continue to lag flower sales. The once-promising category took a hit during the vape crisis of 2019. Then it seemed as if sales were finally recovering, only to be dealt another blow, which was Covid. Since the virus affects the respiratory system, consumers were sticking with old-fashioned flower versus inhaling a cannabis oil. However, Burleson said he believes vape comparisons are likely to improve as the market gets further away from both issues.

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At the time of publication, Borchardt had no positions in the stocks mentioned.

TAGS: Investing | Stocks | Consumer | Marijuana | Real Money | Cannabis | Coronavirus

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