Investing in cannabis stocks requires patience and a strong tolerance for risk. It could be years before marijuana is legalized at the federal level. Until that occurs, many businesses in the sector will face…
some challenges, and their stock prices could reflect that too.
For Trulieve Cannabis (OTC:TCNNF), Cresco Labs (OTC:CRLBF), and Green Thumb Industries (OTC:GTBIF), however, the limited legal market for cannabis in the U.S. isn’t necessarily a downside. By expanding in key state markets that offer a limited number of licenses, these multi-state operators (MSOs) have boosted their revenues and profits. All three have consistently performed well in the last few quarters, and are the best marijuana stocks to buy this month.
1. Trulieve Cannabis
Trulieve’s strategy of strengthening its position in its home state Florida has proved to be a smart move. Recently, the company opened two more stores in Florida, bringing it to 90 dispensaries there and 100 total nationwide.
This has allowed Trulieve to capture around 50% market share in the state, which has helped the company increase its revenues significantly. Even with the rise of other competitors in Florida, their market share has remained around 50% and has had consistent solid growth over the past year. In the second quarter, total revenue grew 78% year over year to $215 million. Most of that can be attributed to its medical cannabis segment. Consistent revenue growth has allowed the company to report its 14th consecutive quarter of net profitability. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at $95 million for Q2, a 55% year-over-year jump, while net profits grew 16% to $41 million. Management expects the company will bring in about $1.2 billion in revenue and $461 million in adjusted EBITDA in 2021.
Trulieve’s long-term success should also be bolstered by its $2.1 billion acquisition of Arizona-based Harvest Health & Recreation, a deal that was announced in May. Once that deal closes, Trulieve will have a total store count of 140 and 3 million square feet of cultivation capacity in the U.S.
This deal also provides access to Arizona, Pennsylvania, and Maryland — potential key cannabis markets. Arizona recently legalized recreational cannabis, and sales should start there by 2024. Meanwhile, developments are ongoing in Pennsylvania and Maryland to legalize the substance for adult use. Strengthening its medical cannabis presence in these states will give a competitive advantage to Trulieve if cannabis is legalized at the recreational level.
After depending only on medical cannabis for a while now, the company is attempting (slowly) to advance in the recreational segment, which will strengthen its growth not only in Florida but also in other states. Trulieve launched a few high-margin cannabis derivatives — including gels, chocolates, cookies, and brownies — for medical cannabis patients in Florida in Q3 2020. In the meantime, though, its peers will be hard-pressed to come close to catching up to its position in the Sunshine State.
2. Cresco Labs
For Cresco Labs, the legalization of cannabis for recreational use by adults in its home state of Illinois has been a boon. The new law took effect in January 2020, and since then, cannabis sales in the state have soared. Through August, total recreational sales reached $874 million, and experts predict that total adult-use sales in 2021 will easily surpass last year’s $1 billion mark.
Cresco Labs’ total revenue rose by a whopping 123% year-over-year to…
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