Benzinga | Aug 25, 2021 09:52AM EDT

Why Are AYR Wellness And Verano Holdings Best Positioned For NJ's Recreational Cannabis Program?

In the most recent November elections, fully 67% of New Jersey's adult voters came out to say yes to legalize cannabis.

The new cannabis law, signed by Governor Phil Murphy in February, had a deadline of Aug. 21 for the New Jersey Cannabis Regulatory Commission to create its rules and regulations. The commission complied.

However, out of the state's 565 municipalities, 360 have chosen not to allow the creation of adult-use cannabis shops, 115 have not yet decided and only 90 have said yes.

Cantor Fitzgerald analyst Pablo Zuanic shared his "brief thoughts on the coming New Jersey rec (or is it wreck?) program" in his Tuesday note.

"We fear New Jersey may not live up to expectations, at least initially," Zuanic began.

New Jersey's cannabis sales are expected to start on Feb. 15 at the latest, according to an announcement from state regulators. But, at the moment, there are only eight out of 21 medical cannabis stores in municipalities that have chosen to participate in the program, explained Zuanic.

Lethargic Start

Referring to the NJ state cannabis commission as being "far from nimble," approval of new license applications will be slow, said Zuanic, adding that the main concern is not only a sluggish start but a low number of shops. "Only eight stores for a population of 9 million, plus 'visitors' from Pennsylvania, Connecticut and New York."

As a comparison, Zuanic looked at Arizona, population 7 million, which had 70 stores up and ready to sell adult-use cannabis on the first day of the program. And despite that, the "long lines made TV headlines."

"We fear a 'hiking' trip to the Berkshires in western Massachusetts may be more time ecient (and healthier) than standing in line for hours in one of those eight New Jersey towns come February," Zuanic pointed out.

AYR Wellness, Verano Holdings Best Positioned To Thrive

Currently, there are only two publicly traded cannabis operators positively positioned for the new cannabis program in New Jersey, Zuanic noted - AYR Wellness (OTCQX: AYRWF) and Verano Holdings (OTCQX: VRNOF). Both companies hold two of the 10 licenses for medical marijuana operations in the state. Of the other eight, six are publicly traded - Acreage Holdings (OTCQX: ACRHF), Ascend Wellness (OTCQX: AAWH), Curaleaf (OTCQX: CURLF), Green Thumb (OTC: GTBIF), TerrAscend (OTCQX: TRSSF) and Columbia Care (OTCQX: CHWTF).

What gives Ayr Wellness and Verano a competitive advantage? They have three stores each in areas where people have chosen to say yes to the state recreational cannabis program.

Photo: Courtesy of Manisha Raghunath on Unsplash