There is no denying the marijuana industry is booming, and there are investing opportunities to jump on, but how do you navigate those opportunities? The cannabis industry is still highly volatile, and some companies are a safer bet than others. Three of the most promising are featured below, but first…
Here’s What You Need to Know About Cannabis Stocks
Just a decade ago, most investors would have laughed at the thought of pot being a sound investment. However, in less than ten years, marijuana went from being illegal in 50 states to legal, at least in some capacity, in well over half of the states.
Cannabis shops are popping up all over, research is at an all-time high, and people are starting to come around to the idea of medicinal marijuana. There are still many hurdles concerning normalization and regulation — especially since cannabis remains illegal at the federal level. Until these kinks are ironed out, the market will continue to experience volatility.
For the most part, companies that operate in the cannabis industry fall into three key categories:
- Product and service providers (e.g., equipment manufacturers, delivery services, growing technology, industry consulting, etc.)
- Biotechnology companies that focus on cannabis
- Growers and retailers
Here are 3 top pot stocks to consider:
Planet 13 Holdings
Planet 13 Holdings (NASDAQ: PLNHF) opened its Las Vegas dispensary in 2018, becoming the largest of its kind in the world at 112,000 square feet.
It is a small company with a market cap of $500 million, operating with a unique strategy. Unlike most dispensaries, Planet 13 creates a unique retail experience within its massive superstores. Currently, the company only operates in Nevada and California.
Planet 13 Holdings reported almost $119.5 million in revenue for fiscal 2021, despite operating in just two states. The company also has an edge as a vertically integrated (cultivating, processing, and dispensing) leader. With plans to move into other states, Planet 13 Holdings is one cannabis company to watch.
Summary of Planet 13 Holdings’ financials for fiscal 2021:
- Revenue was nearly $119.5 million versus $70.5 million in 2020
- Gross profit was over $66 million, compared to just under $35.1 million in 2020
Jushi Holdings (NASDAQ: JUSHF) is a “next-generation” cannabis platform for retail, cultivation, and manufacturing. The $550 million-market-cap company has 29 retail stores in the United States, and revenue is growing exponentially.
Since Jushi went public in June 2019, less than two years after its founding, the price of JUSHF stock has increased by nearly 100%. However, shares of Jushi are currently trading near 52-week lows, down from the 52-week high of $9.21. Although the price action is concerning, the fundamentals look solid.
Summary of Jushi’s financials for fiscal 2021:
- Total revenue of $209.3 million, an increase of approximately 159% year-over-year
- Adjusted gross profit of $92.1 million, an increase of 144% year-over-year
- Net income of $25.3 million, an increase of $237.2 million year-over-year
GrowGeneration (NASDAQ: GRWG) is unique in that it is not purely a cannabis company. It is a hydroponics specialist that supplies the increasing number of cannabis growers across the country. GrowGeneration operates over 60 stores in 13 states, selling products and equipment. Best of all, the company is profitable.
In 2022, GrowGeneration plans to open 15-20 new locations, anticipating another solid year. It recently acquired Horticultural Rep Group, the largest chain of specialty hydroponic and organic garden centers in the United States.
- Record revenue of $422.5 million for the year, an increase of 119%
- Net income for the full year was $12.8 million, compared to $5.3 million in 2020
The Bottom Line
The top three stocks have managed to grow revenue in a limited market. As the market evolves and illegality issues subside, more opportunities will arise for these industry leaders. For patient investors looking for exposure to this burgeoning industry, it may well make sense to buy the dip at current prices and hold long-term.