The top 10 multi-state cannabis operators (MSOs) of the moment saw incredible double-digit growth in the second quarter of this year, which ended on June 30th. At the same time, their stock prices have remained dim for the most part. So why are the two not correlating as one might expect? Equity analysts weighed in on the matter, explaining how it has almost everything to do with investors’ waning interest as federal legalization and reform happens at a glacial pace.

Before we dive into the complexities of cannabis business stocks, the impressive profit of four of the five largest publicly held MSOs deserves a shoutout. Leading the group is Trulieve, a Florida-based powerhouse of an MSO, with $40.9 million in earnings. “Trulieve continues to showcase its profit prowess,” equity analyst Andrew Partheniou of Stifel GMP in St. Louis wrote after the company posted its 14th consecutive quarterly profit. While Trulieve has what Partheniou called “cash cow status” in Florida, it’s expected that they’re on the cusp of facing steep competition as more MSOs move into the sunshine state. However, the company is also expected to succeed wildly in Arizona as they complete their full stock acquisition of AZ’s Harvest Health & Recreation.

Green Thumb Industries saw solid continued growth, as well, with a year-over-year revenue increase of 85.4% to $221.9 million. Pablo Zuanic, an equity analyst for New York-based investment banking firm Cantor Fitzgerald, noted that the company’s growth is most likely linked to new capacity in Illinois and that additional capacity in Ohio, New Jersey, and Pennsylvania will continue to drive growth by 2022. “We expect Green Thumb to benefit from various tailwinds in the months ahead,” wrote Zuanic.

Illinois-based Cresco Labs also had a great Q2 with a 17.7% quarter-over-quarter revenue growth of $210 million, amounting to 122.8% year-over-year. According to their press release, they saw record retail revenue of $101.3 million from their 33 stores, a 22.3% increase from the first quarter. Charles Bachtell, Co-Founder and CEO of Cresco Labs, said “Q2 was a strong quarter of head down execution at Cresco Labs and once again we are hitting our stride as we enter the next phase of growth. During the quarter we continued to invest in infrastructure, operationalized new assets, and deployed our proven playbook to build top positions in the most important U.S. cannabis markets.”

While Curaleaf is the largest MSO in the cannabis industry by revenue and did see growing sales and operating margins during Q2, they were the only one of the top companies to experience bottom-line loss, which is reported to be $9.8 million. Zuanic attributed the loss “to a drain in operating cash as Curaleaf builds its inventory in anticipation of the launch of medical cannabis smokable flower sales in New York and the development of East Coast recreational marijuana markets,” per MJBiz. Speaking of the East Coast, the company is planning an impressive expansion in Florida, hoping to increase its retail store from 37 to 60 by the end of 2022.

With all of that positive news (save for Curaleaf’s unfortunate bottom-line loss), however, also comes the conundrum of meager stock prices across these top-performing MSOs. While Trulieve actually managed to turn a multi-million dollar profit, their shares have declined nearly 50% since mid-March to less than $27 a share. “There’s a huge but obvious disconnect between stock price performance and growth of revenues and earnings,” wrote Dan Ahrens, managing director and chief operating officer of Maryland-based AdvisorShares and portfolio manager of AdvisorShares Pure US Cannabis ETF. “MSO stocks have been lousy for the last six months or so for a host of reasons unconnected to earnings.” In addition to Trulieve, Green Thumb Industries, Curaleaf, Ayr Wellness, and Cresco Labs are among the fund’s biggest holdings. 

According to Matt Karnes, founder of GreenWave Advisors, a New York-based cannabis financial research and consulting firm, the stagnation of the federal legalization process is “keeping these stocks in limbo,” and Ahrens agrees. “Short-sighted retail investors expected federal reforms in cannabis laws,” said Ahrens, adding that such reforms “are now dragging out for an unknown period of time.” We’ve been watching the process of federal legalization hit roadblock after roadblock for some time now, even though 69% of Americans say they’re in favor of recreational marijuana. Now, it seems that investors who saw lucrative opportunities in cannabis as the market began to explode in legalized states are losing interest since they aren’t yet seeing the returns they hoped for when they first invested.

Per Ahrens in MJBiz, there are two main factors suppressing industry share prices:

• Restricted access to MSO stocks by certain brokerage firms, wire houses and big banks because of marijuana’s federally illegal status.
• Low trading volume. MSO stocks, which trade on over-the-counter exchanges in the U.S., don’t generate the trading volume that Nasdaq- or New York Stock Exchange-listed stocks have. The lower market float can make a stock more vulnerable to an attack by short sellers. At the same time, solid buying pressure could cause the stocks to rebound sharply.

That’s that on quarter two news for the top cannabis MSOs, folks. Check back in a few months to see how things have progressed at the end of quarter three.