Canaccord Genuity analyst Bobby Burleson increased his long-term cannabis growth outlook for the U.S. for 2019 to 2022 from 19% CAGR to 20%. It's a modest increase that Burleson said in his latest report published on July 1 that reflects increased expectations for Illinois. Other states that demonstrated positive momentum included Massachusetts and Nevada, while New York's assumptions were lowered.

Illinois Governor J.B. Pritzker signed a bill legalizing adult use cannabis in 2020. "With recreational sales set to kick off next year, we are increasing our state estimates to $488 million in 2020 from $277 million, $734 million in 2021 from $342 million and $987 million in 2022 from $395 million to reflect the anticipated ramp," wrote Burleson. He added that this bodes well for Acreage Holdings (ACRG.U), Harvest Health & Recreation (HRVSF) and MedMen (MMNFF) noting that these companies had existing medical businesses in the state.

Massachusetts adult use market has been slow to get underway as the licensing process had dragged on for many in the industry. However, the pace seems to be picking up. "In April and May, monthly retail sales exceeded $30 million and as of May the state is on a run rate of more than $400 million in annual rec sales," said Burleson. More retail stores are opening that are closer to larger population areas and in the suburbs of Boston. He said that he is increasing his 2019 estimate to roughly $600 million, up from $578 million. He expects that the state sales will top $1.2 billion by 2022. The companies he thinks will benefit include Acreage Holdings, Columbia Care (COLXF) , DionyMed Brands (DYMEF) , Harvest Health, iAnthus (ITHUF) , KushCo Holdings (KSHB) , Slang Worldwide (SLGWF) , TILT Holdings (TILT) and Trulieve Cannabis Corp (TCNNF) .

New York and New Jersey both failed to pass legislation legalizing adult use cannabis sales causing the analyst to reduce his estimates. In addition, New York doesn't even look as if there will be a significant expansion of the medical market. He does think that some form of legislation could make the 2020 ballot leading to a potential late 2021 market. Burleson wrote, "We are now forecasting initial recreational sales in New York coming in 2022. We have reduced our 2019 and 2020 estimates from $458 million and $604 million to $261 million and $265 million respectively." Acreage and CCHW have exposure to the New York markets, along with MedMen.

New Jersey managed to expand its medical cannabis market and the analyst said that could cause him to increase his estimates at some point. At this time he has a medical sales forecast for the state of $123 million in 2019 and $227 million in 2020.

The analyst went on to note that Nevada continues to see strong trends even though the state is facing litigation issues around its licensing process. He expects retail sales to be around $745 million in 2019 and they could grow to nearly $1 billion in 2022. Expansion is limited as the litigation has caused the state to hit the brakes on issuing more. If a resolution occurs, more license could be issued later this year. Wholesale prices could drop as large-scale cultivation operations come to life. He noted that CLS Holdings USA (CLSH) , DionyMed, Green Growth Brands (GGB) , Harvest Health, iAnthus, MedMen, Planet 13 (PLNHF) , Plus Products (PLUS) and 1933 Industries (TGIFF) have the most exposure in this state.

Texas is a tiny state for the cannabis industry, but Burleson pointed out that the state did expand its medical program and eased access with regards to getting a physicians approval. At this time, there are only 500 people in the program and the state expects only $55 million in sales by 2020. However, Burleson suggested that if Texas did legalize like other top medical only markets it could generate sales of $2.1 billion in 2020. That really shows the promise of the market, but there is no indication that could actually happen.

Burleson and his colleagues rated all the companies mentioned as Speculative Buys.