While there are some of the traditional industries in which investors can invest, nowadays, most of the investors focus on investing in alcohol stocks, marijuana stocks, etc. Investing in the top marijuana stocks mean that investors are parking their funds in the companies which are in the business of making and selling cannabis. Therefore, investing in top marijuana stocks provides an opportunity to look above and beyond the conventional areas of investment.
Experts believe that overall cannabis market sector should touch more than US$55 billion by 2024. Recreational cannabis use is illegal in several jurisdictions including in numerous states in the United States and around the world. Depending on the laws related to recreational and medicinal use, individuals will move towards demanding medical validation (cannabis prescriptions) so that criminal penalties can be avoided. As of now, Canada, the USA, Germany and Israel have been categorised as current leaders in the global marketplace for cultivation and production of cannabis. Population in the USA has largest consumer base for medicinal and recreational cannabis.
Demand of cannabis worldwide continues to rise as more people hear of its potential benefits in view of managing arthritis, problems related to skin, chronic pain, seizures, epilepsy, anxiety, etc. Global cannabis packaging industry appears to be in the state of transition from illegal to a legal market, and there are expectations of some winners and losers. Large and renowned national brands and producers which have economies of scale should win. Small producer and retailer are expected to lose without laws protecting them from higher competition.
Legal cannabis market went up by ~46% in 2019 even though there were challenges and obstacles which were caused by overregulation and overtaxing in 2 biggest markets namely: California and Canada. This exhibit actual nature as to how popular cannabis is among consumers and ongoing impact of new markets which are coming online and maturing. Experts believe that possibilities are boundless as political progress tries to opens up new avenues throughout the world, and struggling markets plan to work out their difficult regulatory framework.
With this in mind, let us now have a look at top marijuana stocks to invest.
1. Innovative Industrial Properties, Inc.
Innovative Industrial Properties Inc is real estate investment trust which is engaged in the acquisition, ownership, and management of specialized industrial properties that are leased to state-licensed operators for regulated medical-use cannabis facilities.
The company has released results for the second quarter ended June 30, 2023 and its total revenues of ~$76.5 million represented 8% growth from previous year’s quarter. Net income attributable to common stockholders came in at ~$40.9 million for 2Q or $1.44 per diluted share. Rent collection for the company’s operating portfolio (which is calculated as base rent and property management fees collected as percentage of contractually due base rent and property management fees) came in at 97% for 3 months ended June 30, 2023.
The company has highlighted that it has no debt maturities until May 2026, except $4.4 million principal amount of 3.75% exchangeable Senior Notes in 2024. Debt service coverage ratio of the company came in at 16.0x (calculated as per IIP’s 5.50% Unsecured Senior Notes due 2026).
In 2Q, the company’s revenue was supported by activity in previous periods for the acquisition and leasing of new properties, additional building infrastructure allowances which were offered to tenants at certain properties which resulted in rises to base rent, tenant reimbursements and contractual rental escalations at some of the properties.
The company paid quarterly dividend of $1.80 per common share on July 14, 2023 and its AFFO payout ratio came in at 80%.
2. Cresco Labs Inc.
The company is a vertically-integrated multi-state cannabis operator in the US. It grows, manufactures, and distributes cannabis utilising a consumer-packaged-goods (CPG) approach.
The company’s second quarter revenue came in at $198 million, exhibiting a rise of 2% as compared to previous quarter. This growth stemmed from retail growth of 4% and flat wholesale revenue. Gross profit of the company came in at $87 million, making up ~44% of revenue.
It has generated positive operating cash flow of $18 million, which includes $14 million of one-time cash charges associated to facility closures, severance payments and M&A related fees. The company saw net loss of $43 million, including $22 million of impairment charges.
With the company’s focus on improving scale and efficiencies throughout the entire organization, it continues to accomplish more with less – resulting in the 38% improvement in adjusted EBITDA in comparison to previous quarter. The company saw improved profitability and cash flow in its core markets, which positions it well for the capital-efficient growth and expansion opportunities which lie ahead.
3. Green Thumb Industries Inc
The company has its headquarters in Chicago, Illinois, and it produces and sells medicinal and recreational cannabis with the help of wholesale and retail channels in the United States.
It has announced that its Board of Directors has authorized repurchase pursuant to the normal course issuer bid, of up to 10,486,951 of subordinate voting shares over the 12-month period. The Board of Directors authorized to spend up to USD $50 million in this program.
The company’s second quarter revenue came in at $252 million, exhibiting a rise of 2% in comparison to first quarter. GAAP net income of the company came in at $13 million or $0.05 per basic and diluted share. Adjusted EBITDA of the company was $76 million or 30% of revenue.
Importantly, cash flow from operations came in at $18 million after the payment of $52 million of taxes this quarter. For the first 6 months of 2023, it saw adjusted EBITDA of $152 million and cash flow from operations came in at $93 million.
To sum up
Since there are cannabis companies which continue to face regulatory restrictions, investments in top marijuana stocks should be made by investors who have higher risk appetite. As there are countries working to decriminalize or legalize cannabis, there are expectations of significant opportunities for new-age and existing companies.
Read Also:
1 Comment