3 Cannabis Stocks to Buy Now
While there is still a lot of reservation against recreational marijuana in many U.S. states, there is little room for doubt about the prospects for medical marijuana products. According to GM Insights, the size of medical marijuana has already crossed $5 billion in 2018, and it is set to grow at a CAGR of more than 29% up to 2025. With this kind of growth, there will be many cannabis stocks that will increase in value – but what are the 3 cannabis stocks to buy now?
In the U.S., over 30 states have legalized medical cannabis and the number is expected to go higher in the upcoming years, whereas, in Canada, both recreational and medical marijuana is already legalized. Globally, more than 20 countries have legalized the use of medical marijuana products.
The extract of the cannabis plant that is used to treat various chronic and rare illnesses is known as medical marijuana. Research has found that cannabis-based medicines are particularly effective in treating rare forms of epilepsy, arthritis, chemotherapy-induced nausea, and anorexia among many others.
In the U.S., medical marijuana is used in various forms such as vapes, dried flowers, topical lotions, or CBD-infused beverages or edibles. Due to increased R&D activities, we can expect to see more applications of medical marijuana products being introduced over time. Currently, this segment is in its formative stage, and it is likely to gain traction in the next few years. However, to see the full potential of medical cannabis, there must also be uniform laws in place for safe practices with regards to the testing standards, drug usage, and patient condition.
The value chain of medical marijuana consists of various players. There are cultivators who grow the medical cannabis plant, and also harvest and process it for distribution. Then comes extraction service providers who extract the CBD and THC for use in the medical hemp products. These extracted compounds or cannabinoids are then sent to pharmaceutical and cannabis biotech companies for drug development. The finished products are sold through various retail outlets and dispensaries. Hence, for buying medical marijuana stocks, investors can look at many companies operating in this ecosystem.
What are the 3 cannabis stocks to buy now? Let’s take a closer look.
Trulieve Cannabis (OTC: TCNNF) is one of the hottest stock picks in 2020 as it has soared nearly 60% since the start of the year. A leading player in Florida’s medical cannabis space, Trulieve commands a market share of about 50%. The company is on a rapid expansion track as it continues to add new stores not only in Florida but also in other states. Trulieve is on the verge of capturing the market in Pennsylvania, California, Massachusetts, and Connecticut.
The company has robust financials and it is likely to maintain its momentum. In the second quarter of fiscal 2020, Trulieve’s revenue surged 26% quarter-on-quarter to $120.8 million. The company is optimistic about future growth and boosted its guidance for full-year 2020.
The revised full-year 2020 revenue is expected to be in the range of $465 million to $485 million. This would translate to a 88% rise in sales compared with Trulieve’s revenue in the previous fiscal year.
Being consistently profitable is a pleasant surprise for Trulieve investors. Unlike other hemp stocks, the company saw a $6.6 million net profit in Q2 and has been profitable in the past ten quarters. Because of this, we believe Trulieve Cannabis is one of the 3 cannabis stocks to buy now.
Innovative Industrial Properties (IIPR)
If investors want to reap the true potential of the medical marijuana market, they need to look beyond pure-play pot stocks. Ancillary stocks like IIPR (NYSE: IIPR) has offered unprecedented gains in the stock market and is poised to outpace pot producers. Since its IPO in December 2016, this REIT has multiplied over five times in value and has easily beaten the broader market indices.
The core factor behind IIPR’s growth is its unique business model. IIPR purchases properties from medical cannabis companies and enters into long-term lease agreements on these properties.
The average period for which the REIT leases out the properties is nearly sixteen years. In some cases, it may extend up to twenty years. The REIT has also charted a growth path through a focus on acquisitions. As a result, IIPR enjoys a consistent stream of revenue and it can even outpace the inflation with periodic rental hikes. Investors can thus be assured of consistent cash flows.
IIPR saw a 182.5% year-on-year growth in its revenue for the second quarter. Like Trulieve Cannabis, IIPR is also one of the few profitable companies in the cannabis space. In Q2 it posted a net profit of $13.3 million, as compared to $3.4 million in the same period a year ago. Moreover, due to stable rental cash flows, the REIT is also able to maintain a high dividend yield of 3.1%.
IIPR is an enviable option for income and growth investors and we believe it’s certainly is one of the 3 cannabis stocks to buy now.
GW Pharma (NASDAQ: GWPH) is actually a biotech player and not a core cannabis company. However, it finds a mention in this list because of its flagship medicine, Epidiolex, which is derived from CBD. This medicine has witnessed staggering success in the treatment of epileptic seizures due to two rare syndromes in early childhood.
The drug has been well-received by the patients and the pharmaceutical industry. Epidiolex is the single-most factor driving the growth of GW Pharmaceuticals. The company is still unprofitable but one with immense growth potential.
GW PHARMACEUTICALS has a robust balance sheet with a cash balance of more than $500 million. This depicts its inherent strength in being unperturbed in the face of the pandemic. It also highlights that the company has adequate finance to fuel further R&D and its growth opportunities.
The COVID-19 crisis did not have a significant impact on most of the medical marijuana companies, because they were deemed as an essential service. The unique proposition of the company is its affordable drugs and limited competition in this segment. With more treatments and clinical trials underway, GW Pharmaceuticals is surely a smart stock pick in the medical cannabis category and we believe it’s one of the 3 best cannabis stocks to buy now.
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