The cannabis stock outlook is shaped by two interesting forces. On the one hand, the long-term secular investment thesis – the story about legalization in the major economies and how that will spark the growth of a major industry-led by intrinsic demand freed from the unnatural barriers of the law as new legislation comes together to create a different picture – is still very much intact and seems destined to shape the big-picture premise for the space.
On the other hand, cannabis investors have been burned by both the aftermath of the Canadian legalization movement and hope related to the earliest phase of the Biden presidency. Leverage was in place in both scenarios, and the lack of quick, explosive growth to pay off those bets has left investors in doubt.
The result is a basket of stocks set for a long-term upward trend that is languishing in the doldrums and discounts of unrequited investment love. It’s a classic structural growth setup – unloved stocks with an undeniable long-term macro tailwind.
This should broadly guide the expectations for the space, including core names like GrowGeneration Corp (NASDAQ:GRWG), Innovative Industrial Properties Inc (NYSE:IIPR), Sugarmade Inc (OTC US:SGMD), Cronos Group Inc (NASDAQ:CRON), Green Thumb Industries Inc (OTC US:GTBIF), Canopy Growth Corp (NASDAQ:CGC), and ETFMG Alternative Harvest ETF (NYSEARCA:MJ).
Some of the more interesting catalysts in this group are noted below.
Cronos Group Inc (NASDAQ:CRON) has been one of the most interesting names in the emerging cannabis stock space, with occasional meme stock status among the Reddit traders that have driven so much of the action in the group so far this year.
The company engages in the production and distribution of cannabis. Its brands include PEACE NATURALS, COVE, Spinach, Lord Jones, and PEACE+.
Cronos Group Inc (NASDAQ:CRON) recently announced the appointment of Bob Madore as Chief Financial Officer, effective August 9, 2021, who will succeed Jerry Barbato.
“We are pleased to add a leader of Bob’s caliber to the Cronos Group team,” said Kurt Schmidt, President and Chief Executive Officer of Cronos Group. “Bob brings to Cronos Group a proven track record of financial leadership spanning an impressive and diverse 30-year career. His operational capabilities and experience at high profile global consumer brands make him the ideal person to be our next CFO. We look forward to Bob playing a key role in our efforts to capitalize on growth opportunities as Cronos Group continues to execute our regional strategies and R&D and innovation work at the brand level.”
Even in light of this news, CRON has had a rough past week of trading action, with shares sinking something like -12% in that time. That said, chart support is nearby, and we may be in the process of constructing a nice setup for some movement back the other way. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -13%.
Cronos Group Inc (NASDAQ:CRON) managed to rope in revenues totaling $19.2M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 40.1%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels exceeding current liabilities ($1.4B against $248.4M).
Sugarmade Inc (OTC US:SGMD) is potentially one of the more interesting names in the cannabis space, though it has gotten almost no fanfare from industry investor sites and analysts. SGMD is a classic under-the-radar name. Perhaps that explains the stock’s cheap levels at this point.
In contrast to that set of dynamics, the company has been putting together a unique vertical model in the California cannabis space that represents true farm-to-door operations, with a growing licensed cannabis footprint. According to its materials, SGMD is a product and branding marketing company investing in operations and technologies with disruptive potential. Its Brand portfolio includes CarryOutsupplies.com, SugarRush™, Nug Avenue, and Budcars.com.
Sugarmade Inc (OTC US:SGMD) recently announced the closing of the company’s acquisition of a property in Los Angeles that will serve as a new distribution/delivery hub for its Nug Avenue cannabis delivery segment.
As noted in the release, this follows the Company’s recent announcement that it has signed a Memorandum of Understanding to obtain three non-storefront California Cannabis licenses from the Los Angeles Department of Cannabis Regulation, along with corresponding licenses from the California Bureau of Cannabis Control, which collectively will provide the licensing foundation for the opening of three (3) new cannabis related commercial operations in California.
The Company plans to assign one of these licenses, once obtained, to this newly acquired property, designated as a licensed cannabis delivery business under its Nug Avenue brand.
Sugarmade Inc (OTC US:SGMD) CEO, Jimmy Chan, noted, “We are very excited to announce the upcoming location of our new Nug Avenue delivery hub, which is in a prime position to serve the downtown LA area. Our initial Nug Avenue location has been open for nearly 6 months and has established a strong brand with tremendous growth in membership – already exceeding 10,000 members and growing fast. Our remaining licenses can be applied to both expansion and verticalization of Nug Avenue operations as we continue to build a top-tier farm-to-door leader in the California cannabis marketplace.”
Green Thumb Industries Inc (OTC US:GTBIF) is a key multi-state operator in the US market. The company engages in the manufacture and distribution of branded cannabis products. It operates through the Consumer Packaged Goods and Retail segments.
GTBIF has been one of the all-stars of the thesis that the MSO’s will ultimately transcend the notion that producers and distributors will end up seeing only commodity margins as legalization takes hold. Green Thumb is based in Chicago and has seen gains in market positioning as Illinois gains ground as an early recreational legalizer.
Green Thumb Industries Inc (OTC US:GTBIF) recently reported its financial results for the second quarter ended June 30, 2021, including news that revenue increased 14.1% sequentially and 85.4% year-over-year to $221.9 million, first half 2021 revenue increased 87.3% to $416.3 million, and adjusted Operating EBITDA grew 11.1% sequentially and more than doubled year-over-year to $79.3 million or 35.7% of revenue.
“The second quarter continued to be about disciplined execution and the team should be proud of the results. On a year-over-year basis, we grew revenue by 85% to $222 million; more than doubled Adjusted EBITDA to $79 million and continued to deliver positive cash flow. Since the first quarter, we closed three acquisitions, expanding our manufacturing capabilities in Massachusetts and geographic footprint into two new states, Virginia and Rhode Island. These critical steps strengthened our position to distribute our brands to more patients and consumers in existing and new markets,” said Green Thumb Chairman, Founder and Chief Executive Officer Ben Kovler.
Even in light of this news, GTBIF has had a rough past week of trading action, with shares sinking something like -8% in that time. That said, chart support is nearby, and we may be in the process of constructing a nice setup for some movement back the other way. GTBIF shares have been relatively flat over the past month of action, with very little net movement during that period.
Green Thumb Industries Inc (OTC US:GTBIF) managed to rope in revenues totaling $246.2M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 78.4%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels exceeding current liabilities ($346.8M against $136.3M).
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