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4 cannabis stocks poised to take advantage of legalization votes

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While there’s no end in sight to the coronavirus pandemic, in some ways life is going on much of the business as usual. The US presidential election is approaching in less than three months, and beyond the presidential and legislative races, the issue of legalizing marijuana at the state level is once again on the agenda. In New Jersey, Mississippi and South Dakota, cannabis legalization initiatives have already officially qualified for vote in November, while in Arizona, Montana and Nebraska, officials are currently reviewing signatures submitted by groups trying to get their proposals voted on. .

Efforts to qualify ballot legalization initiatives in other states, including Nebraska, Missouri and Oklahoma, were essentially put on hold earlier in 2020 due to COVID-19.

Cannabis companies have attracted a lot of attention this year following the spikes in sales that have accompanied the pandemic. While there’s still no clarity on when Congress might start weighing legalization at the federal level, adding new states to the legal marijuana market could raise some concerns for companies, including Green Thumb Industries ( GTBIF -7.08% ), Curafeuille Holdings ( CURVE -7.50% ), Cresco Laboratories (CRLBF -8.00% ) and canopy growth ( CGC -4.27% ) to new heights.

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Green Thumb and Cresco Labs Take Advantage of Recently Expanded Opportunities

Green Thumb’s revenue rose 268% to $103 million in the first quarter, largely due to the diversification of its business. It has 42 cannabis retail stores in 10 states – Connecticut, Massachusetts, Nevada, Florida, New Jersey, New York, Ohio, Illinois, Maryland and Pennsylvania. The company reported EBITDA (earnings before interest, taxes, depreciation and amortization) of $25.5 million.

Green Thumb remains strong in his home state of Illinois, which legalized recreational cannabis on Jan. 1. June was the strongest month so far, with legal sales from all operators in the state totaling $46 million. Green Thumb also plans to tap into the tourist cannabis market in Nevada – it opened a new store in Las Vegas in June.

In the months following the release of its first quarter results, Green Thumb opened six more stores; it is now the proud operator of 48 outlets in 12 US states. With the licenses it already holds, it has the potential to expand its footprint to 96 locations in total. So you can imagine the potential increases in revenue and profits that Green Thumb could produce once more states join the legal cannabis list and the company expands into these new markets.

In contrast, the strength of Illinois-based Cresco Labs is that it has chosen to focus on its home state and two other key markets, Pennsylvania and California.

On July 13, he opened his eighth dispensary in Illinois—Sunnyside South Beloit—and his 18th in the United States. Its financial stability is evident from rising revenue and earnings – in the first quarter, its revenue grew 215% year-over-year to $66.4 million and its EBITDA reached $3.2 million.

Curaleaf targets key markets with greater cannabis demand

Curaleaf targets certain major cannabis markets. Recently, it completed its acquisition of Grassroots, which will give it a huge footprint in California, with its population of 40 million. Recreational cannabis is legal in the state, where the company now has “135 dispensary licenses, 88 operational dispensary locations, more than 30 processing facilities and 22 cultivation sites with 1.6 million square feet of cultivation capacity. current”.

Curaleaf also strengthened its position in New Jersey in July by acquiring Curaleaf NJ, which was previously required by state law to operate as a nonprofit.

For now, New Jersey limits the use of cannabis for medical purposes, but recreational legalization is on the ballot this fall, and polls suggest it is likely to pass. Recently, Curaleaf also launched an alternative form of cannabis-based medicine: sublingual tablets. The company is expected to roll them out before the end of the month, and they will be available to medical marijuana users at 28 dispensaries in Florida. Curaleaf’s revenue increased 174% to $96.5 million in the first quarter, while adjusted EBITDA was $20 million.

Canopy Growth is poised to gain traction in the US market

Unlike the other companies mentioned here, Canadian-based Canopy Growth has yet to experience skyrocketing revenue growth or even profitability – revenue rose 15% in the first quarter as it posted an EBITDA loss. of C$102 million – but its growth strategies look promising.

He has a deal to acquire a cannabis company Area holdings, but that will only happen after the United States legalizes marijuana at the federal level. Once the deal is done, it will give Canopy access to Acreage’s North American stores in which to sell its innovative cannabis-derived products – vapes, drinks, edibles and chocolates, among others.

Canopy Growth has partnered with lifestyle guru Martha Stewart to launch CBD products for people and pets in Canada and the United States. It also has a partnership agreement with alcoholic beverage giant Constellation Brands and plans to launch cannabis-infused sports drinks through the acquisition of BioSteel Nutrition.

keep an eye on them

Profitability is not an issue for the three US cannabis companies discussed here, and they all have strong balance sheets. At the end of the first quarter, Cresco Labs had $68.6 million in cash and cash equivalents, while Green Thumb and Curaleaf had $71.5 million and $176.4 million cash and cash equivalents on the books, respectively. Therefore, they should have the resources to expand into all US states that legalize cannabis in 2020 or move from medical use only to fully legalizing adult use.

We’ll likely learn more about their near-term growth plans when they release their next quarterly reports: Curaleaf, Cresco Labs, and Green Thumb will report on August 17, August 20, and August 12, respectively.

Meanwhile, Canopy Growth isn’t lagging behind in capital – Constellation Brands’ large investment in the Canadian company has put it on a safe footing for now. It has yet to reach profitability, but if its growth strategies go as planned, it could happen soon. It will release its results for the first fiscal quarter of 2021 on August 10.

I would say that now is the time to acquire some shares of these companies. Even factoring in the potential for states to expand the legal market out of the equation, Cresco Labs, Green Thumb, and Curaleaf are the three strongest players in the cannabis space.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.