After a period of dizzying momentum and overvaluation that ended in February, pot stocks have likely overshot in the other direction recently, with many becoming oversold and underappreciated despite continued progress toward key state legislative progress and clues suggesting that movement on the US federal side is becoming less and less illusory.
Nonetheless, stocks in the space are becoming in many case very undervalued in terms of price/sales multiple when compared with other groups in the market. Part of this is naturally due to the high valuations seen in many groups right now as we move forward with a late-stage retail-driven bull market.
But one could have said the same thing in 1995, when avoiding fast-growing undervalued names could have steered one from life-changing future investment gains.
With this in mind, some of the more compelling names in the marijuana space could be worth attention, including GrowGeneration Corp. (Nasdaq:GRWG), Cannabis Strategic Ventures (OTC US:NUGS), Innovative Industrial Properties Inc. (NYSE:IIPR), Cronos Group Inc. (Nasdaq:CRON), Canopy Growth Corp. (Nasdaq:CGC), HEXO Corp. (Nasdaq:HEXO), and AdvisorShares Pure US Cannabis ETF (NYSEArca:MSOS).
We take a closer look at a few of the more interesting stocks in the group below.
GrowGeneration Corp. (Nasdaq:GRWG) engages in the retail sale of hydroponic and organic specialty gardening products.
It offers lighting fixtures, nutrients, seeds and growing media systems, trays, fans, filters, humidifiers and dehumidifiers, timers, instruments, water pumps, irrigation supplies, and hand tools.
GrowGeneration Corp. (Nasdaq:GRWG) recently announced that the Company and Harvest 360 Technologies, LLC (H360) will work together to develop a National Program to support individuals with the education and training to acquire the skills necessary to gain access to the state licensing process and types of support that are required to be successful in this emerging industry.
“This industry is expanding exponentially. Markets like Oklahoma and Michigan are proving that servicing smaller grows and home grows, is not only good business it is good practice” said Michael Salaman President and co-founder of GrowGen, “this program with H360, gives us a direct method to impact the ability of new companies to grow their businesses”
Even in light of this news, GRWG has had a rough past week of trading action, with shares sinking something like -5% 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 -15%.
GrowGeneration Corp. (Nasdaq:GRWG) managed to rope in revenues totaling $125.9M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 189.7%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels exceeding current liabilities ($124.5M against $59.8M).
Cannabis Strategic Ventures (OTC US:NUGS) is the most speculative name on this list, but we include it here because it has started to put together an increasingly interesting story as a vertically integrated California cannabis player with growing operations at both ends of the river.
The company recently announced that it is set to take full operational control of the downtown Los Angeles “MDRN Tree” cannabis product dispensary, which will become its first in-house end-market consumer-facing retail sales outlet. According to the release, NUGS will begin to record sales from the dispensary on its books beginning in November 2021.
Cannabis Strategic Ventures (OTC US:NUGS) has been piling up catalysts, this morning further announcing the signing of a Memorandum of Understanding with Devine Solutions, Inc., relating to the proposed acquisition by NUGS of an indoor cannabis cultivation facility in Sacramento.
According to the terms of the MOU, NUGS intends to purchase 10% of the Facility at a valuation of $15 million for the entire Facility, with an option to purchase an additional 41% of the Facility (which would comprise a controlling 51% stake) at this same valuation.
The Facility is approximately 15,600 square feet and has the potential to house an estimated 500 grow lights. It is projected to produce 2-3 lbs. of premium exotic cannabis flower per light per harvest across an estimated 5.75 harvests per year, suggesting an upside potential of over 7,000 lbs. of premium cannabis flower per year.
Cannabis Strategic Ventures (OTC US:NUGS) CEO, Simon Yu, commented, “This deal represents the potential to sharply increase our premium cannabis production capacity and materially augment our status as an emerging leader in the vertically integrated California cannabis marketplace. We have already amassed years of experience refining our cultivation methods and strains in an outdoor framework with our NUGS Farm North site. Adding a top-tier indoor cultivation operation stands to help us further build upon that success and drive more volume in the premium flower market, which has powerful implications given our recent expansion into the dispensary marketplace with our MDRN Tree downtown LA dispensary location. The combination grants NUGS expanding operations at both ends of the farm-to-sale model.”
Innovative Industrial Properties Inc. (NYSE:IIPR) is a real estate investment trust that engages in the acquisition, ownership, and management of industrial properties, with an emphasis on cannabis cultivation properties.
The company operates through the following geographical segments: Arizona, California, Colorado, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New York, North Dakota, Ohio, and Pennsylvania. The firm’s property portfolio includes PharmaCann; Ascend Wellness Holdings, LLC; Vireo Health, Inc.; and Green Peak Industries, LLC.
Innovative Industrial Properties Inc. (NYSE:IIPR) recently announced that it closed on the acquisition of a 201,000 square foot industrial property in Desert Hot Springs, California, and entered into a long-term lease with Gold Flora, LLC (Gold Flora).
“We are excited to welcome Laurie and the Gold Flora team as our newest tenant partner,” said Paul Smithers, President and Chief Executive Officer of IIP. “Gold Flora has established a strong reputation and presence in the largest regulated cannabis market in the world, California, and we look forward to supporting them as a long-term real estate capital partner for many years to come, as they continue to expand the breadth of their operations and reach throughout the state.”
If you’re long this stock, then you’re liking how the stock has responded to the announcement. IIPR shares have been moving higher over the past week overall, pushing about 7% to the upside on above average trading volume. Shares of the stock have powered higher over the past month, rallying roughly 13% in that time on strong overall action.
Innovative Industrial Properties Inc. (NYSE:IIPR) managed to rope in revenues totaling $48.9M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 0.4%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels exceeding current liabilities ($805.7M against $0).
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