Markets
California Cannabis: A Golden Opportunity With Unique Challenges
If the state of California were a country, it would have the fifth largest GDP in the world.
Take this kind of spending power and combine it with the recent legalization of recreational cannabis, and it’s fair to say that the Golden State is primed to become the Holy Grail of cannabis opportunities.
But while the market is home to immense potential, this doesn’t mean that the California cannabis business isn’t without its own unique challenges and obstacles to navigate.
Navigating California Cannabis
Today’s infographic comes to us from High Hampton Holdings and it helps set the stage for the boom in California, as well as listing the regulatory hurdles that companies must be prepared to deal with in the jurisdiction.
In the next year, it’s expected that recreational cannabis sales in California will surpass the existing total from the already established medical market.
By 2025, those recreational sales could be $4 billion per year – that’s five times the size of the medical market!
Sticker Shock
The potential of the California cannabis market may be obvious, but navigating both the state’s notorious regulatory system and tax regime is a clear threat for companies aiming to succeed in the space.
Since legalization, the price of cannabis in California has become an immediate hiccup that has initially angered consumers, reducing expected demand and state revenues.
According to BDS Analytics, the effective sales tax on a gram of cannabis bought in San Jose works out to a hefty 38%. Add this to the higher cost of doing business in the state, and the sticker shock for consumers is real.
Complex Legislation
After high taxes, companies entering the California market must also navigate the state’s complex rules and regulations about growing, distributing, and selling cannabis.
To give an idea of what this looks like for the average company, here is a brief snapshot of California’s regulatory environment:
- There are three governing bodies for cannabis in the state: California Department of Food and Agriculture (CDFA), California Department of Public Health (CDPH), and the Bureau of Cannabis Control (BCC)
- There is a dual licensing requirement in the state, in which companies must be licensed both by the state as well as by local authorities
- Companies must get their local license before their state license – and this is complicated: there are 58 counties and 482 incorporated cities, each with their own specific set of rules and requirements
- Currently, many growers do not meet state or local standards
- The supply of zoned, permitted areas for cannabis cultivation are scarce and in high demand
Even further, the rules around cultivating, distributing, and retailing all involve specific and highly-specialized licenses. For example, only those with a full-service distribution license can coordinate required third-party testing, ensure packaging reviews of products, and collect and remit cultivation excise taxes.
Golden Potential
Despite the challenges that exist in the California cannabis market, it is still the undisputed jewel in the crown of the global legal cannabis space, offering access to 39 million consumers and large amounts of disposable income at play.
Only companies that can navigate this uncharted territory will be able to take advantage of this lucrative opportunity.
Markets
Will Tesla Lose Its Spot in the Magnificent Seven?
We visualize the recent performance of the Magnificent Seven stocks, uncovering a clear divergence between the group’s top and bottom names.
Will Tesla Lose Its Spot in the Magnificent Seven?
This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.
In this graphic, we visualize the year-to-date (YTD) performance of the “Magnificent Seven”, a leading group of U.S. tech stocks that gained prominence in 2023 as the replacement of FAANG stocks.
All figures are as of March 12, 2024, and are listed in the table below.
Rank | Company | YTD Change (%) |
---|---|---|
1 | Nvidia | 90.8 |
2 | Meta | 44.3 |
3 | Amazon | 16.9 |
4 | Microsoft | 12 |
5 | 0.2 | |
6 | Apple | -6.7 |
7 | Tesla | -28.5 |
From these numbers, we can see a clear divergence in performance across the group.
Nvidia and Meta Lead
Nvidia is the main hero of this show, setting new all-time highs seemingly every week. The chipmaker is currently the world’s third most valuable company, with a valuation of around $2.2 trillion. This puts it very close to Apple, which is currently valued at $2.7 trillion.
The second best performer of the Magnificent Seven has been Meta, which recently re-entered the trillion dollar club after falling out of favor in 2022. The company saw a massive one-day gain of $197 billion on Feb 2, 2024.
Apple and Tesla in the Red
Tesla has lost over a quarter of its value YTD as EV hype continues to fizzle out. Other pure play EV stocks like Rivian and Lucid are also down significantly in 2024.
Meanwhile, Apple shares have struggled due to weakening demand for its products in China, as well as the company’s lack of progress in the artificial intelligence (AI) space.
Investors may have also been disappointed to hear that Apple’s electric car project, which started a decade ago, has been scrapped.
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