Liquidity and prices in cannabis stocks dipped recently, so now is a good time to buy.
Investors should prepare for liquidity in marijuana stocks to rise in August, says Jason Spatafora, co-founder of MarijuanaStocks.com and head trader at True Trading Group. “This is the time of year until early August where you can take a position in this space because when the liquidity comes back, it will catch people off guard,” he says. “The one thing we’ve seen time and time again with cannabis is when the volume does come back, it is a moonshot.” Prices have dipped even though fundamentals have not changed and first-quarter earnings were solid, but higher expectations brought stock prices down, says Timothy Seymour, founder of Seymour Asset Management in New York and portfolio manager of Amplify Seymour Cannabis ETF (ticker: CNBS). “After a major pullback, the fundamentals of cannabis companies have improved and we are seeing a handful of catalysts ahead,” he says. Here are six marijuana stocks to consider adding to your portfolio.
Curaleaf Holdings (CURLF)
Curaleaf, a Wakefield, Massachusetts-based cannabis company, operates in 23 states with 106 dispensaries, 23 cultivation sites and 30 processing sites. The company reported a first-quarter revenue increase of 170% from last year and adjusted earnings before interest, taxes, depreciation and amortization that was up 213% from last year. The company is “now cementing its leading status in terms of top-line growth,” says Seymour, adding that 2022 should be “impressive since there is no question the 23-state footprint is starting to deliver on operational leverage.” Curaleaf is adding cultivation in Colorado and planning to double its footprint by 2022, but keeping an eye on being fiscally prudent. “A lot of cannabis stocks held their 200-day moving average in the downdraft of March and April and are now challenging the 50-day moving average,” Seymour says. “The charts and sector look like they are ready to run. The volume has been very light in the industry and may be about to change.”
Cresco Labs (CRLBF)
Cresco Labs is a Chicago-based company that is active in 10 states and has 18 production facilities, 44 retail licenses and 32 dispensaries. The company reported first-quarter revenue of $178.4 million, an increase of 168.8% year over year, and cash and cash equivalents of $255.5 million as of March 31. The company has continued to grow consistently in all markets. Wholesale revenue rose by 150.8% year over year to $95.6 million. Revenue increased to $82.8 million, rising 193.2% year over year. The acquisition of Bluma Wellness in Florida last December was “not only smart due to demand and quality flower produced by One Plant, but kicked off what is sure to be a year of serious mergers and acquisitions activity,” Seymour says.
Trulieve Cannabis Corp. (TCNNF)
Trulieve operates in five states — California, Connecticut, Florida, Massachusetts and Pennsylvania — and has 2 million square feet of cultivation facilities in Florida. In May, the company reported a quarter-over-quarter revenue increase of 15% to $193.8 million and a net income of $30.1 million. Trulieve has expanded its footprint across the U.S. and in May acquired Harvest Health & Recreation, an Arizona-based multistate operator that reported first-quarter revenue of $88.8 million. The company also reported the first full quarter of operations in Pennsylvania, where it opened the first phase of its new cultivation facility and acquired West Virginia operator Mountaineer Holding in May. The company has remained “more conservative” in its strategy to increase its footprint, says CEO Kim Rivers. “We will look for expansion opportunities as the landscape is evolving and has seen accelerated growth” due to political factors and more states approving the medicinal and recreational use of cannabis.
Green Thumb Industries (GTBIF)
Green Thumb, a Vancouver and Chicago-based national cannabis consumer packaged goods company and retailer, reported revenue of $194.4 million in the first quarter, an increase of 90% year over year and its fifth consecutive quarter of positive cash flow from operations of $39.7 million. Green Thumb has quality operations and solid free cash flow generation and corporate governance, Seymour says. “They were pushing U.S. GAAP-accounting standards earlier than many relative to their peers. Investors may find the stock price for 2022 to look even cheaper as earnings quality improves and for that reason, (Green Thumb) is one of the top-weighted stocks in our portfolio,” he says. Investors should consider holding tier-one stocks such as Curaleaf, Green Thumb and Trulieve for a longer period, Spatafora says.
TerrAscend Corp. (TRSSF)
TerrAscend, a New York and Toronto-based North American cannabis operator, reported that first-quarter net sales rose by 106% year over year to $53.4 million. Adjusted year-over-year EBITDA increased to $22.6 million, compared to $3.7 million in the first quarter of 2020, and the company has $234 million in cash. The company is a good addition to a portfolio with its recent U.S. expansion in Pennsylvania, Seymour says. “TerrAscend had the biggest run in 12 months through February, and the stock had the bigger pullback,” he says. “The growth of their Pennsylvania footprint and profitability of the market is what makes them trade at a premium to their peers and their execution will continue into New Jersey as this market begins to explode for them. TerrAscend’s approach is deep and narrow and has a Northeast footprint.”
Ascend Wellness Holdings (AWWH)
Ascend Wellness Holdings operates in Illinois, Michigan, Ohio, Massachusetts and New Jersey. The company reported revenue of $66.1 million, an increase of 193% year over year, with a net loss of $48.2 million during the first quarter of 2021 that included a $36.5 million one-time, noncash charge compared to a net loss of $7.1 million in the previous quarter. Ascend raised $86.4 million from its initial public offering. “The company’s strategy is to focus on limited license states with a competitive moat that allows it to strengthen its foothold in targeted markets while being a responsible steward of capital,” says Aaron Raub, senior equity analyst at Ambria Capital. Investors should note that Ascend’s gross profit margin and EBITDA margins are lower than some of its peers due to a previous expenditure “required for building out assets that should normalize over time as Ascend will have a greater contribution from high-margin cultivation in 2021,” Raub says.
Top marijuana stocks to buy:
— Curaleaf Holdings (CURLF)
— Cresco Labs (CRLBF)
— Trulieve Cannabis Corp. (TCNNF)
— Green Thumb Industries (GTBIF)
— TerrAscend Corp. (TRSSF)
— Ascend Wellness Holdings (AWWH)
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Update 06/08/21: This story was published at an earlier date and has been updated with new information.