3 actions of marijuana that could make you richer
Even though marijuana stocks are currently trading below their February highs, they still have huge potential. There isn’t much movement around federal legalization now, but state legalization won’t slow down. As a result, the cannabis market will continue to explode, bringing cannabis stocks to even higher levels.
Two pure-play cannabis companies, Jushi Holdings (OTC: JUSHF) and Cresco Laboratories (OTC: CRLBF), and another business related to the pot, GrowGeneration (NASDAQ: GRWG), are climbing the list of the best stocks of marijuana to buy and hold for the long term. Let’s see why.
1. Cresco Laboratories
This Illinois-based multi-state operator (MSO) may not yet have a large footprint nationwide, but its revenue and profits are growing even with just 37 dispensaries in 10 states. In the second quarter, total revenue jumped 123% year-over-year to $ 210 million.
Cresco’s smart strategy of targeting key cannabis markets (like Pennsylvania, Illinois and Ohio) that offer limited licenses has worked in its favor. These states restrict the number of licenses they offer and the stores that can open in the state. This limited competition has helped Cresco to build up a loyal following for its various brands such as Mindy’s Edibles, High Supply, Cresco Reserve, etc.
This has helped the company raise $ 101 million from retail revenue alone. The rise of recreational cannabis in his home state of Illinois has also benefited Cresco. The market is on track to cross $ 1 billion in total recreational product sales last year. With 11 Sunnyside retail stores in the state, he can take advantage of this opportunity. It also helped Cresco report second quarter net income of $ 2.7 million, a drastic improvement from its loss of $ 41 million in the period last year.
2. Jushi Holdings
This Florida-based vertically integrated cannabis company may be small in terms of market cap ($ 669 million), but it has huge potential to shine as the industry grows. With 20 retail stores nationwide, its total revenue jumped 219% year-over-year to $ 48 million in the second quarter, ended June 30. The company attributes this growth to four key markets: Pennsylvania, Illinois, California and Virginia. .
Jushi followed the same strategy as Cresco by targeting markets that offer limited licenses, resulting in a net profit of $ 4.8 million in the second quarter, compared to a net loss of $ 9.3 million he a year ago. California and Illinois already have a booming cannabis market. Virginia’s recreational market will open in 2024, while efforts are underway in Pennsylvania, which could present plenty of opportunities for this small-cap MSO.
Since its second quarter results, the company has opened two more stores in Pennsylvania, bringing its total to 22 locations nationwide. It also recently acquired an Ohio-based medical cannabis processor that gave Jushi access to an 8,000 square foot facility in the state.
With a stable balance sheet, the company is well prepared to grow further as more states legalize cannabis. It ended the second quarter with $ 126.8 million in cash and short-term investments and $ 85.1 million in total debt principal.
Even though GrowGeneration isn’t a cannabis company, this Denver-based supplier of hydroponics has huge prospects. He sells supplies and equipment needed by cannabis growers. With 58 stores nationwide at the end of the second quarter, the company increased revenue 190% year-over-year to $ 126 million. The company also reported adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $ 14.5 million, up from $ 4.4 million a year earlier. Net income of $ 6.7 million was also higher than the $ 2.5 million in the second quarter of last year.
In August, GrowGeneration acquired hydroponics equipment and the Hoagtech Hydroponics indoor gardening store in Washington. The company believes the addition could help generate $ 15 million in revenue per year. It has also raised its revenue forecast for the full year of 2021 to a range of $ 455 million to $ 475 million and plans to have more than 70 garden centers by the end of the year. If it hits the upper end of the forecast, that will represent a 146% increase over 2020 revenue – impressive growth.
With sales on the rise and an expanding national footprint, GrowGeneration is a lucrative cannabis buy right now. Jushi Holdings being a penny stock may make investors skeptical, but its long-term growth prospects are tempting. With strong fundamentals, all three cannabis stocks have the potential to skyrocket when federal legalization occurs, making investors wealthy. All three stocks are trading almost 50% below their 52 week highs, making this a good time to include them in your portfolio.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.