2 Cannabis Stocks Set to Double in 2021
The cannabis industry has gained plenty of momentum over the last couple of months. Folks in 36 states now have access to medical cannabis and federal decriminalization seems more imminent now than ever. It may be time for investors to stop sitting on the sidelines and start capitalizing on high growth cannabis stocks. In fact, these 2 cannabis stocks are set to double in 2021.
1. Scott’s Miracle-Gro (SMG)
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Why is SMG cannabis stock set to double in 2021? Well, the Ohio-based gardening products company is a purveyor of systems for hydroponic gardening and other products utilized for growing cannabis and other crops. Over the past five years, the stock has provided a 204% return to its investors including a 31% surge over the last quarter. In fact, Cannin.com analysts gave SMG a STRONG buy rating back in December 2018 and again in May of 2020. Had you taken our advice then, you would have made a near 100% return on investment.
Cannin.com has over two years of successful stock picks. In fact, 78% of our picks prove to be true within 30 days or less.
The cannabis green wave is expected to continue in 2021 as well, and there is a good chance of bringing in some remarkable reforms. As legalization continues across the US (with federal decriminalization becoming more likely) there stands to be a massive acceleration in the purchase of hydroponics, the main product offered by Scotts Miracle to the Cannabis Industry.
Although Scotts-Miracle-Gro does not grow cannabis itself, the green wave will favor the company’s growth. Cannabis growers will always require products like hydroponics, fertilizers, or LED lighting systems for production. Scotts-Miracle-Gro is a major player in this space. Its subsidiary, Hawthorne Gardening Company, a dealer of indoor and hydroponic growing will benefit the most from this wave.
The Hawthorne business segment deals in gardening items for both commercial and hobby purposes and makes the highest contribution towards the company’s revenues. Since cultivation using hydroponics requires only a fraction of space with no soil so growing inside homes is also possible.
The evolving mindsets of people towards the pot and the pandemic have further intensified its customer base. Scotts-Miracle-Gro also advocated the benefits of hydroponic gardening. Due to these reasons, Hawthorne’s products are now demanded not only by businesses but also by consumers wanting to cultivate for themselves. This division is now bringing the majority of its revenue underlying the success of the Hawthorne acquisition.
Scotts-Miracle-Gro leadership has made some great decisions that have catalyzed the company’s growth. It immensely benefited from the synergies achieved from the acquisition of Sunlight Supply and also achieved a huge competitive advantage. Further, it created a modern and cost-efficient supply chain for its hydroponic business.
In addition, Scotts-Miracle-Gro teamed up with North America’s first research and development facility, The Flowr Corporation. The company aims to increase its ability in producing high-quality premium cannabis containing maximized cannabinoids and terpene expression of genetics. With this collaboration, it aims to successfully produce a stain at par with its award-winning, flagship-strain BC Pink Kush.
Scotts-Miracle-Gro has outperformed just about every cannabis stock in the industry. In this fourth quarter, its US consumer sales grew by 90% during the quarter, while the company-wide sales also increased by 79%. Hawthorne sales itself rose by 68% rise for Q4 and 61% for the full year.
This increase in sales was seen across all the products and retail channels. EPS of $7.24 was achieved against $4.47 of Q3-2019. Free cash flows of $495.3 million were also recorded for the year indicating solid liquidity in its operations. Scotts-Miracle expects to deliver an EPS ranging from $8 to $8.40 during the fiscal year 2021 which means yet another year of double-digit growth in earnings is visible.
From the looks of it, Scotts-Miracle-Gro cannabis stock is set to double in 2021. Cannin.com continues to back this cannabis stock.
2. Innovative Industrial Properties (IIPR)
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Why is IIPR cannabis stock set to double in 2021? Well, Innovative Industrial owns 67 properties across 17 states, with 5.8 million square feet of rentable property. Shares of IIPR have increased by over 70% in the last year. Cannin.com analysts recommended buying shares of IIPR back in early 2019. At the time, this cannabis stock was trading at $89.34. Today, it is trading at IIPR 190.57 (1.93 1.02%), up significantly since our analysts first made their recommendation. Innovative Industrial Properties is a cannabis-focused REIT which offers triple-net-leasing to the cannabis growers. Due to the wave of legalization going on this demand is expected to increase more in the coming days. By its compelling and beneficial offerings to the pot companies, IIPR can take full advantage of the scenario.
Innovative Industrial Properties has extremely well-positioned financials. For the period ended September 30, 2020, it was able to raise its revenue by 41% from the last quarter and by a massive 196% on a year over year basis. The adjusted fund from operations also increased by 192% over last year.
Along with an increase in revenues, it managed to increase its asset base as well to $916 million from $690 million with its investment portfolio tripling this quarter. As always it ensured to share its gains with investors by increasing dividend payouts by 10% from previous quarters and by 50% from Q3 of 2019 which means the stock is now yielding 2.7%.
Unlike other REITs, it has very little debt of just $143.7 million and a debt-to-gross assets ratio of 9.4%, which gives it high leverage in its operations. Its rental collections have also been 100% at a time when its peers suffered lack of occupancy with little rental collections.
Also, where interest rates in the US market are pretty low, it offers really attractive cap rates ranging from 3.75%-6% thereby earning high chunks of interest income. Analysts expect if the same trend continues its revenue may jump by 71% along with a 70% growth in EPS by this year.
The medical, as well as the recreational cannabis industry is growing at a significant rate. ArcView market research states that, by 2025, all states in the U.S. will probably legalize marijuana. As more states have started opening up, the demand for real estate has been growing immensely.
Innovative Properties has also been eyeing mammoth growth and has been making a string of acquisitions to achieve its goal. Additional benefits from the financing activities are also a bonus.
In the third quarter, it had bought five properties adding 448,000 rentable square feet to its existing base in areas like Florida, Michigan, and New Jersey. It also funded some of its tenants to expand in the areas of Illinois, Ohio, and Pennsylvania by investing $180.3 million and thereby enhancing the existing relationships and establishing new tenant relationships. IIPR’s continuous onslaught of expansions has fueled its revenues and cash flows significantly.
IIPR is currently operating in less than half of the states that have legalized medical marijuana so there will be ample partnership and expansion opportunities for the company in the coming months. Also, its strong financial and operational strategies prove it is much superior to many of its peers. Thereby investing in IIPR’s demonstrated business model can possibly provide cannabis investors outsized total returns. For these reasons, we believe IIPR cannabis stock is set to double in 2021. Cannin.com continues to support this cannabis stock.
2 Cannabis Stocks Set to Double in 2021
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