Beacon Securities issued an update on the cannabis space on Monday, focusing on regulatory and state-by-state developments in the US market. Despite the beaten up market, analysts Doug Cooper and Russell Stanley have a number of Buy ratings, noting in particular Ascend Wellness (Ascend Wellness Stock Chart, Quotes, News, Analysts, Financials CSE:AAWH.U), AYR Wellness (AYR Wellness Stock Chart, Quotes, News, Analysts, Financials CSE:AYR.A) and High Tide (High Tide Stock Chart, Quotes, News, Analysts, Financials TSXV:HITI) The new year brings new hope but that’s about all you get in the cannabis sector these days, as names across the board continue their march downward. Since about mid-February of last year stocks have been falling steadily, both for companies in Canada and the US. But the two markets are quite different, with Canada’s federal legalization occurring in 2018 and companies and provinces having now taken a few years to work through growing pains. Meanwhile, south of the border a situation that looked very promising for movement at the federal level upon the election of Joe Biden and his Democratic party in late 2020 has now become much less optimistic. Beacon analysts noted the recent announcement by Democrat representative Ed Perlmutter of Colorado that he won’t be running for re-election in November’s mid-terms, a potential blow to the push to pass the SAFE Banking Act which would give banks the ability to serve state-legal cannabis companies and thereby open up the door to better results for businesses and more money flowing into the sector. Cooper and Stanley note that Perlmutter was a vocal supporter of cannabis reform and is credited with authoring the SAFE Banking Act, which cleared the House of Representatives this past April. Now, the companion bill sits in the Senate with 41 sponsors, nine of which are Republicans, making for relatively strong bipartisan support. “Efforts to include SAFE in the defence bill (the NDAA) fell short late last year because of opposition from within the party, as Senate Majority Leader Schumer has continued to prioritize his much broader legalization bill (the CAOA),” Cooper and Stanley wrote. “We continue to believe that the CAOA has extremely low odds of gaining traction in this Senate. With mid-terms approaching in November, and historical data indicating that the Democrats will likely lose notional control of the House and/or the Senate, the clock is running. We expect the Senate Majority leader to realize he will have to 'settle for a field goal to put some points on the board' before mid-terms by passing SAFE. While the loss of SAFE's champion is a setback for overall reform, his announcement may create additional urgency for prioritizing SAFE, which would be a positive,” they said. The analysts noted November sales numbers in Arizona and Colorado, both of which saw legal sales slip. The drop was three per cent in Arizona, although adult sales broke the $60-million mark for the first time, rising one per cent compared to a drop of eight per cent in the state’s medical market. In Colorado, legal sales were $158 million, down ten per cent both compared to the previous month and year-over-year. At the same time, the analysts said Colorado’s 2021 overall sales were tracking to three per cent gains over the previous year. “We note that Colorado’s adult-use market is now entering its 9th year after opening in 2014, making it one of the most mature in the US. The observed Jan-Nov 2021 growth rate of three per cent is very modest relative to the 25 per cent growth we saw in 2020 and is a very good illustration of what MSOs have talked about: the pandemic served to pull some sales growth forward. Markets are still growing, but at a more moderate pace,” Cooper and Stanley said. As for other states, the analysts reported that Virginia is still hashing out the details on adult-use sales with a planned opening in early 2024, New Jersey is seeing strong demand for cultivation licenses while its adult-use timeline is still TBD, Florida’s adult-use initiative looks to have 2024 in its sights, Ohio’s adult-use supporters are gearing up for a spot on the November mid-term ballot, and a bill is in the works for the same for Maryland. And on the international front, Cooper and Stanley said Germany is taking steps to fulfill its plan to legalize adult-use sales and cultivation. On individual picks in the space, Stanley has “Buy” ratings on vertically integrated multi-state US operators Ascend Wellness (US$18.00 price target for a projected return of 227 per cent at the time of publication) and AYR Wellness ($81.00 target for a projected return of 285 per cent at the time of publication). On Ascend, Stanley said he’s “highly confident” that the company will prevail in its court battle with MedMen Enterprises over Ascend’s acquisition of an 87 per cent stake in MMEN's New York operations for US$73 million. With AYR Wellness, Stanley noted the company’s opening of its 44th dispensary in the state of Florida and its plans to add 21 more stores in the state in 2022 along with further cultivation and production enhancements set to drive product quality and volume improvements. For his part, Cooper, who covers Canadian cannabis retailer High Tide (“Buy” rating and $10.50 target for a projected return of 75 per cent), noted the company’s opening of its 107th Canadian location, this one a Canna Cabana store in Regina, Saskatchewan, the company’s seventh outlet in the province.