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Pot Stocks for the Next Wave (GTBIF, TLRY, NUGS, ACRGF, TCNNF)

There’s strong reason to believe that the long-suffering cannabis stock space, as a group, has finally bottomed. If true, it would mark the beginning of the third major bull market in cannabis. The first began in 2009 and ran through 2014.

The second got going in mid-2016, sparked into gear by enthusiasm in front of the coming elections in the US, when a number of states were slated to vote on legalization measures, most of which were expected to pass from the start. The run was a frontrunning process on the growth that would follow the widening footprint of the legal market.

That bull cycle lasted through the move to legalize in Canada on a national basis in October 2018. Since then, with too many investors chasing too many empty stocks invented to capitalize on the wave of enthusiasm, the space has been crushed, with governance, capital, and leverage issues leading to a rash of bankruptcies and executive overhauls.

However, a number of factors have lined up to suggest a bottom in sight. And the capitulatory plunge in the equity markets in March of this year as the pandemic devastation took hold created a perfect catalyst to close out the bear with a bang. Now, on the other side of that process, and with a fresh election on the way – when many states will again be setting up to legalize pot – we have strong reason to believe the Cannabis Stock Bull 3.0 is underway.

So, get your research hat on. Here, we take a closer look at a few of the more interesting plays in the space, including: Green Thumb Industries Inc (OTCMKTS:GTBIF), Tilray Inc (NASDAQ:TLRY), Cannabis Strategic Ventures (OTCMKTS:NUGS), Acreage Holdings Inc (OTCMKTS:ACRGF), and Trulieve Cannabis Corp (OTCMKTS:TCNNF).

 

Green Thumb Industries Inc (OTCMKTS:GTBIF) recently announced the expansion of its retail footprint in Illinois with the opening of Rise Niles, the company’s eighth store in Illinois and 45th in the nation, on May 28.

As noted, this is the third adult-use only store Green Thumb has opened in Illinois this year. The company has opened a total of six stores across the country year-to-date.

Green Thumb Industries Inc (OTCMKTS:GTBIF) as a producer and distributor of cannabis products including flower, concentrates for dabbing and vaporizing, edibles, and topicals. The company markets its products through third party retailers. It also owns and operates a chain of 50 retail stores under the RISE dispensaries name. The company was founded in 2014 and is headquartered in Chicago, Illinois.

The company is a national cannabis cultivator, processor and dispensary operator, is dedicated to providing dignified access to safe and effective cannabis nationwide while giving back to the communities in which they serve.

As a vertically integrated company, GTI manufactures and sells a well-rounded suite of branded cannabis products including flower, concentrates, edibles, and topicals. The company also owns and operates a rapidly growing national chain of retail cannabis stores called RISE(TM) dispensaries.

The stock has been acting well over recent days, up something like 7% in that time.

Green Thumb Industries Inc (OTCMKTS:GTBIF) managed to rope in revenues totaling $138M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 271.9%, as compared to year-ago data in comparable terms. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($101.8M against $182.5M, respectively).

 

Tilray Inc (NASDAQ:TLRY) managed to rope in revenues totaling $52.1M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 126.2%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($174M against $171.4M).

The company offers its products in Argentina, Australia, Canada, Chile, Croatia, Cyprus, the Czech Republic, Germany, New Zealand, and South Africa. Tilray, Inc. was incorporated in 2018 and is headquartered in Nanaimo, Canada.

One of its key subsidiaries is High Park, which was launched to produce and distribute world-class cannabis brands and products for the Canadian market. Based in Toronto and led by a team with deep experience in cannabis and global consumer brands, High Park has secured the exclusive rights to produce and distribute a broad-based portfolio of cannabis brands and products in Canada, subject to applicable laws and regulations.

Tilray Inc (NASDAQ:TLRY) is one of the highest profile names in the space. But if you look under the surface, there are some significant debt-servicing issues that will continue to limit the long-term success possible here.

While this is a clear factor, it has been incorporated into a trading tape characterized by a pretty dominant offer, which hasn’t been the type of action TLRY shareholders really want to see. In total, over the past five days, shares of the stock have dropped by roughly -2% on above average trading volume in a tape that has been kind to other names in the space.

 

Cannabis Strategic Ventures (OTCMKTS:NUGS) is an up-and-comer in the space, with remarkable growth over recent months, and recent reports of improvements simultaneously in production capacity, sales volume, and margins occurring together. That puts it squarely on our radar.

Illustrating this dynamic, the company most recently announced that recent sales from its latest harvest have earned unit pricing at a strong 11 percent premium to current industry standard benchmarks for cannabis sales on a per pound basis.

According to cannabisbenchmarks.com, cannabis sales in the U.S. currently average roughly $1,525 per pound. The Company has transitioned from selling at a discount relative to benchmark levels six months ago to now selling at a premium to benchmark levels, with pricing in recent sales coming in at approximately $1,700 per pound.

“We have seen a steady improvement in per pound pricing driven by improving quality mostly as a consequence of better operational execution at NUGS Farm,” remarked Simon Yu, CEO of Cannabis Strategic Ventures. “It also represents another signal that we are heading in the right direction in terms of our core objectives: expanding production capacity, expanding sales volume, and expanding profitability on a per unit basis.”

Cannabis Strategic Ventures (OTCMKTS:NUGS) is also coming off a record month of sales in April, where it booked orders at an annualized pace exceeding $10 million.

The stock has been performing ahead of the space overall, with shares gaining about 100% in the past 60 days.

Cannabis Strategic Ventures (OTCMKTS:NUGS) managed to rope in revenues totaling $1.4M in overall sales during the company’s most recently reported quarterly financial data. However, based on recent announcements, Q2 is on pace for potentially 800% sequential growth. This is unofficial but meshes with other information produced by the company.

 

Acreage Holdings Inc (OTCMKTS:ACRGF) most recently announced the sale of certain non-core assets as part of an update to its overall strategic plan to focus on key, profitable operations.

According to the release, the Company expects this shift in focus will lead to immediate margin improvements and accelerate its pathway to achieve positive pro-forma adjusted EBITDA for the full year 2020. The strategic shift is a direct response to significant changes in capital markets, and in anticipation of continued historic pressure on consumer sentiment and regional and national economic uncertainties. In addition to the sale of some non-core and other under-performing assets, Acreage intends to operate with a more optimized overhead cost structure and corporate team to adapt to an ever-changing cannabis landscape.

Kevin Murphy, Chairman and CEO of Acreage, commented: “The impact of the COVID-19 pandemic on U.S. cannabis operators has been profound, at a time when the industry was already reeling from decreased access to capital, legislative uncertainty, and the illicit-market vaping crisis that struck our industry by association. Led by a nimble operating team and Board of Directors that has proven its ability time and again to adapt and thrive in challenging times, we are supremely confident our plan will ensure operational profitability and excellence and position us to deliver improved shareholder returns in short order.”

According to public filings, Acreage is the largest multi-state cannabis operator in the United States in terms of number of states with operating licenses, largest total addressable market, and largest serviceable population.  More recently, Acreage announced a transformative acquisition of Form Factory, which will provide the company with the capabilities to become the cannabis industry’s first and only Consumer Packaged Goods company with a national footprint.

ACRGF has had a rough past week of trading action, with shares sinking something like -4% 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.

Acreage Holdings Inc (OTCMKTS:ACRGF) managed to rope in revenues totaling $21.1M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 101.5%, as compared to year-ago data in comparable terms.

 

Trulieve Cannabis Corp (OTCMKTS:TCNNF) just announced that it opened the doors of a new dispensary on Friday, May 22nd. The latest Florida location marks a milestone 48 locations in the state of Florida and 50 nationwide for Trulieve. Expansion is the name of the game here, and it’s why investors are paying attention to this stock.

According to the release, “Located on West International Speedway Boulevard, the dispensary supports the Company’s mission to expand and ensure safe, reliable patient access statewide. It also joins Trulieve’s 47 other dispensaries statewide, including in nearby Palm Coast, Orlando, and Titusville. At approximately 6,000 square feet, with 1,500 square feet of showroom space and 14 point-of-sale stations, the dispensary is one of the Company’s largest yet.”

Trulieve Cannabis Corp (OTCMKTS:TCNNF) promulgates itself as a company that, through its subsidiary, Trulieve, Inc., engages in the cultivation, possession, distribution, and sale of medical cannabis in the United States.

It offers a suite of Trulieve branded products with approximately 125 SKUs, including nasal sprays, capsules, concentrates, syringes, and cannabis flower in tamper-proof containers for vaporizers, topical creams, tinctures, and vape cartridges.

The company distributes its products to Trulieve branded stores (dispensaries) in Florida, as well as takes orders online and by phone for delivery. As of November 20, 2018, the company operated 21 dispensaries. Trulieve Cannabis Corp. is headquartered in Quincy, Florida.

It will be interesting to see if the stock can break out of its recent sideways action. Over the past week, the stock is net flat, and looking for something new to spark things.

Trulieve Cannabis Corp (OTCMKTS:TCNNF) generated sales of $129.2M, according to information released in the company’s most recent quarterly financial report. That adds up to a sequential quarter-over-quarter growth rate of 22.8% on the top line. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($143.5M against $104.7M).



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