3 marijuana stocks that could be millionaire makers
The marijuana industry has been booming even during a global pandemic. Marijuana was seen as an “essential item” during shutdowns in Canada and the United States, which drove up cannabis sales in both locations – legal cannabis sales in the United States increased by 46% year over year to reach $ 17 billion in 2020.
Sales are also on the rise this year, generating revenue and profit for cannabis companies. The US cannabis industry, in particular, is doing exceptionally well compared to its Canadian counterpart. Among the American companies, the Illinois-based company Green thumb industries (OTC: GTBIF) and Cresco Laboratories (OTC: CRLBF) are my top picks right now. Both have performed well in their last quarters, posting a triplesingle-digit revenue growth.
There is also a Canadian pot company, Canopy growth (NASDAQ: CGC), which also stood out from its peers – mainly due to its strategic decision to partner with the U.S. beverage giant Constellation brands, which keeps your pockets full. Let’s see why these companies have the potential to become millionaires.
1. Green thumb industries
Green Thumb’s exceptional performance continued into the first quarter of 2021, with revenue up 89.5% to $ 194.4 million, driven by higher growth in the 12 states in which it operates. Increased foot traffic at its 56 retail stores and 13 new store openings during the quarter contributed to this remarkable performance. Higher revenues and lower selling, general and administrative expenses to $ 59 million (30% of total revenue, down from 44% in Q1 2020) resulted in another quarter of positive adjusted earnings before interest , taxes, depreciation and amortization (EBITDA).
Positive EBITDA determines how well a business manages its operating expenses, while net profits are its profits after all deductions. Green Thumb did both, posting adjusted operating EBITDA of $ 71 million (up from $ 25.5 million in the period last year) and net profit of $ 10 million (up from a net loss of $ 4.2 million in the first quarter of 2020).
Management noted that most of the revenue growth came from the Illinois and Pennsylvania markets. In Illinois, her home state, recreational cannabis did not become legal until January 2020. Sales to adults alone are expected to total $ 1 billion in the state by 2021. Recreational cannabis is illegal in Pennsylvania, but efforts to legalize it are underway.
Green Thumb has also established itself in the Virginia market by acquiring 100% of Dharma Pharmaceuticals, which will give it access to one of the state’s five vertical licenses. Virginia legalized recreational cannabis starting in July, but retail sales won’t begin until January 1, 2024.
2. Cresco Laboratories
Illinois-based Cresco Labs has also benefited from legalization in its home state, as evidenced by its recent results for the first quarter ended March 31. Retail revenues for 24 stores were $ 83 million, an increase of 193% over the previous year, while wholesale revenues also saw a 151% increase year-over-year. another to $ 96 million.
Another quarter of positive Adjusted EBITDA – $ 35 million – marked an impressive jump from a loss of $ 8.5 million in the quarter last year. The business is not yet profitable, but with continued expansion and the rate at which it is increasing its revenue and EBITDA, it won’t take much longer.
“Execution rate” is the measure used to estimate the future performance of a business based on past performance or historical data. By the end of 2021, Cresco management expects to achieve annualized revenue of over $ 1 billion and an adjusted EBITDA margin of at least 30%.
3. Canopy growth
While Canopy Growth is not yet profitable either, the company is working hard to steadily increase revenue while reducing EBITDA losses. In its fiscal third quarter 2021, which ended on December 31, revenue increased 23% from the same period last year to C $ 153 million. Management was successful in reducing total selling, general and administrative expenses to C $ 144 million, which reduced its EBITDA loss to C $ 68 million, from C $ 97 million in the third quarter of 2020.
Canopy is in good financial shape with the backing of beverage giant Constellation Brands. Constellation invested C $ 245 million in Canopy in 2017 and now owns a 38.6% stake in the company, after exercising its existing warrants. This partnership has kept Canopy in safe waters while focusing on launching more innovative derivative products. Derivatives are recreational marijuana products that Canada legalized in October 2019. The company has offered a wide range of derivatives (vapes, edibles and beverages) in the Canadian market that are receiving good customer feedback, according to The direction.
Canopy strives to grow its business in the Canadian cannabis market and slowly grow in the United States. It expects to achieve positive Adjusted EBITDA by the second half of fiscal 2022. There will still be plenty of room to operate; The global legal marijuana market could grow at a compound annual rate of 26.7% from 2021 to 2028, according to Grand View Research.
The marijuana boom is expected to continue in the United States with the growing possibility of federal legalization. When that happens, Green Thumb and Cresco Labs will be able to capture a huge chunk of the US cannabis market. Canopy Growth and its partner Constellation Brands will also be ready with innovative products to take advantage of a booming space.
But can those pot stocks make you a millionaire? Take the example of Canopy Growth. If you were to invest $ 10,000 in Canopy stock today and it returned to its peak of $ 56.50 in 52 weeks, you would make almost $ 560,000 in profit. For the investment to exceed $ 1 million, the stock would have to double and climb to $ 100. It’s not impossible in the long run – say, 10 years; Federal legalization of marijuana in the United States is then almost inevitable. But that the marijuana industry is very volatile, so low risk investors should consider starting with a small stake in these pot stocks.
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! Questioning 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.