Canaccord Genuity cannabis analyst Bobby Burleson believes execution risk, more than market opportunity will be the focus of the U.S. cannabis industry in 2019, according to a recent investor note put out at the beginning of the year. Burleson, whose note looks at a cross-section of companies from KushCo. Holdings (KSHB) to Planet 13 (PLTH) argued that while opportunity will be a factor, volatility in the market can’t be ignored.

In total, Burleson offered coverage for six cannabis companies, giving a blanket Speculative Buy rating to all of them.

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“Although we believe the scale of the U.S. cannabis opportunity and current multiples warrant Speculative Buy ratings across our coverage universe, we expect any meaningful slippage in 2019 plans to be met with volatility considering heightened implications for valuations,” wrote Burleson in his note. “In general, 2019 forecasts call for dramatic step functions higher for revenue and EBITDA, some of which is M&A dependent. Further, certain plans rely heavily on a timely ramp for Massachusetts, a state that continues to disappoint in terms of rec license lettings.”

He continued: “With this in mind, our 2019 outlook focuses on execution risk more than overall opportunity, and assesses our names accordingly."

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Marijuana stocks fall in 2018

Globally, cannabis stocks have been on a downturn since October. According to the Global Cannabis Stock Index, overall stocks fell 20.3 percent in December and have fallen over 44 percent in the fourth quarter. In total, the Index fell 54.9 percent in 2018, despite positive moves forward for the industry, both politically and financially.

The American Cannabis Operators Index declined 18 percent in December. It includes 17 companies, five of which are CBD or hemp operators.

Speaking exclusively to PotNetwork, Burleson spoke about other mitigating factors in the U.S. cannabis industry that could affect marijuana stocks in the upcoming year. Asked about both the drop in cannabis prices across the country —most notably in states such as Oregon — as well as the continued expansion of state-level legalization without an overarching federal law, Burleson considered both factors to be positives overall.

“[The] drop in price of flower is good for the industry,” said Burleson, noting that it would give cannabis companies a “lower cost to make edibles, vape, and other derivative products.”

“Premium flower prices should remain strong,” he continued.

Similarly, he took a favorable view of the current political situation concerning cannabis in the U.S. While more and more states continue to legalize cannabis, the lack of a federal legalization law —or at least one that gives more leeway to the states isn’t currently an impediment to the market, according to Burleson.

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“Lack of federal regulation in the medium term should allow cannabis companies to scale free from the much larger competitors,” he said.

Overall, Burleson had a cautiously optimistic view of the upcoming year, offering that KushCo. Holdings shows the least execution risk of companies covered, while TILT Holdings (TILT) holds the most.