Banking and finance company Wells Fargo takes a more welcoming stance toward marijuana as it begins covering four cannabis stocks, said Market Watch. This comes in light of the issues surrounding federal marijuana and marijuana banking legalization.
According to Wells Fargo analyst Chris Carey, the company is set to cover Scotts Miracle-Gro (SMG), GrowGeneration Corp. (GRWG), Hydrofarm Holding Group Inc. (HYFM), and Canopy Growth Corp. (CGC).
Of the four, SMG, a fertilizer and hydroponic equipment make for cannabis, is seen as the most bullish with an overweight rating of +1.2%, followed by GRWG’s +5.89 and HYFM’s +2.68% equal weight ratings, and CGC with an underweight rating of +2.892%.
According to Carey, SMG is a buying opportunity for those interested in investing in cannabis stocks. The price target for it is $180.
Carrey noted, “We see opportunity: a stock well off its April highs, a discount to peers, and fundamental opportunity – leader in lawn/gardens and hydroponics – still ahead. Strong operators can take advantage of market dislocations, and we think SMG can re-run its FY18 playbook to consolidate more share (a key driver of hydroponics growth)”
SMG is also at a more stable level compared to other hydroponics companies, especially in the garden sector. Its products are widely available in Home Depot and Lowe’s.
Up next is GRWG, which is poised to be at $18 per unit of stock. This hydroponic company is considered the top retailer not only in the United States but in the entire North American region. This is followed by HYFM and CGC at $33 and $8 per share, respectively.
Wells Fargo’s decision to support these four companies came at a time when the issue of legalization is at its height after the introduction of the first Republican federal bill to legalize marijuana. The Republican bill was sponsored by Representative Nancy Mace along with other co-sponsors.
This new bill from the GOP joins other bills, particularly by the Democrats including the one by Majority Leader Chuck Schumer and other co-sponsors.
Meanwhile, marijuana banking amendments did not make it to the National Defense Authorization Act (NDAA). The reforms, which were tackled in September, aims to protect banks that decide to support legal cannabis businesses. Unfortunately, they were not attached to the bicameral filing submitted Tuesday this week. The reform was not voted on in the House Rules Committee.
This gained the ire of Rules Committee Chairman Jim McGovern, who claimed that those who did not support the amendment are working against small businesses. Particularly, he blasted Schumer, who argued that the Secure and FairEnforcement (SAFE) Banking Act and other similar laws should take the back seat and that reforms should instead focus on broad justice.
McGovern said that Schumer’s stance is “making it very difficult for a lot of small businesses – and minority-owned businesses, too – deal with the issue of cannabis to be able to move forward and to expand and to hire more people.”
Representative Adam Smith, leader of the House Armed Services Committee and lead negotiator on NDAA, said that the lack of priority given to cannabis banking can be harmful.
He said, “The impact of this, as a practical matter, to not have the SAFE Banking Act is incredibly dangerous” because small businesses will need to operate on a cash basis. Moreover, they do not have access to banking services available to other businesses.
Smith added, “I even seriously considered saying, you know, we’re just gonna put it in and the Senate can deal with it. But the bottom line is if the majority leader in the Senate has this opinion – and it’s worth noting that the minority leader has a similar position in the Senate – they don’t want this included, that’s not the way the process works.”
Other lawmakers have expressed similar sentiments, saying that Schumer’s decision to bench the amendment is a “mystery.”
Representative Ed Perlmutter, who sponsored the SAFE Banking Act, asserted that the lack of access to traditional banking services also restricts small and minority-owned businesses from accessing capital.
In the meantime, Perlmutter has announced his intention to file an amendment after the release of the negotiated defense bill. He partnered up with House Speaker Nancy Pelosi and they are planning to take on other routes to compel the Senate to address cannabis banking.
Other concerns about the lack of cannabis banking support stem from safety concerns. Representative Dave Joyce, who has just teamed up with Representative Alexandria Ocasio-Cortez for a legalization bill, said that this can endanger the public and inhibit equity on the economic level. Moreover, it is unsustainable, according to Joyce.
In a tweet, he criticized the Senate’s “all-or-nothing approach” because it creates an obstacle for small businesses and passes up on chances to make progress in terms of cannabis reforms.
However, organizations such as the Drug Policy Alliance said that it is more ideal to wait before addressing cannabis banking. Particularly, comprehensive legalization should precede banking concerns, especially those that support social equity.
The support of the Internal Revenue Service (IRS) could expedite the addressing of cannabis banking reforms. However, an official said that the government body would want to be “paid” to help in the legalization of cannabis banking.
It is important to note that the legalization of cannabis banking would indeed make it easier for the IRS to collect taxes on legal businesses. Keep in mind that support from banks remains to be difficult to find because it is not supported by federal laws.
Aside from cannabis banking, amendments for streamlining the application process for cannabis research grants have been excluded from the NDAA. The reform could have made applying for licenses to investigate and manufacture plants for research purposes.
Another criticism of the NDAA also pertains to the exclusion to make medical marijuana federally legal for military veterans.
With more talks regarding the legalization of marijuana, the push for cannabis banking, and Wells Fargo’s decision to support cannabis stocks, the future may hold more positive developments for the cannabis industry.