3 Reasons Why Innovative Industrial Properties is the Perfect Parallel Cannabis Investment for 2020
Our analysts believe that the REIT corporation Innovative Industrial Properties is the perfect parallel cannabis investment for 2020.
Cannabis investments can be complicated, particularly when it comes to Innovative Industrial Properties. Unlike popular cannabis companies like Canopy Growth Corp. (NYSE: CGC), Aphria, Inc. (NYSE: APHA), and Tilray, Inc. (NYSE: TLRY), the company doesn’t deal with cannabis directly. It instead collects income from those direct cannabis operators who lease their properties in order to cultivate, produce, and distribute cannabis.
Out of all the possible cannabis investing opportunities, our analysts identified three strong reasons why Innovative Industrial Properties is the best cannabis stock to watch in 2020. Reasons outlined by our analysts include Indirect cannabis sector involvement, expansion, and year-over-year growth. But is this one of the best cannabis stock picks for 2020?
Innovative Industrial Properties is a special entity that still resides within the cannabis sector, but doesn’t operate in the same way as other well-known cannabis companies. The company is a REIT corporation that performs acquisitions of industrial locations in order to lease them to cannabis companies for medical cannabis production. This is why our analysts believe this stock is a low-risk investment in the cannabis industry and that it represents one of the best cannabis stock picks for 2020.
Why do we like Innovative Industrial Properties as a top cannabis pick for 2020?
- Indirect Cannabis Sector Involvement: The company has a direct tie to the cannabis sector through the leases that it offers for its industrial properties. Innovative Industrial Properties will always generate the same amount of revenue from its lease agreement and it won’t fluctuate with the demands of the cannabis market. In short, the company is free from the volatility of the cannabis market and instead is secured by the cannabis company operators that enter into a lease agreement with Innovative Industrial Properties. An important fact to add is that the lease agreements it offers to medical cannabis operators often locks them in for a period of 15 years.
- Rapid Expansion: Innovative Industrial Properties has been on a path of rapid expansion since before 2019. The company was able to acquire 15 properties in 2019 across six different states with a majority of five properties in California. The total property count for Innovative Industrial Properties is now 26 and represents a combined square footage total of 2 million square feet. Only 600,000 square feet out of the 2 million is under development, yet 100% of the company’s properties are leased under a lease agreement that has an average of 15 years. The company invested $263 million into properties and has $70 million on top of that set aside for development. It is reported that the return on invested capital for Innovative Industrial Properties is 14.6%.
- Dramatic Year-Over-Year Growth: A few days ago the company released its Q4 2019 earnings report and it was able to beat all the expectations with earnings per share of $0.57 and revenues of $14.4 million. The company’s year-over-year revenue growth is a staggering 202% increase to $44.7 million while earnings per share increased 171%. The estimated revenue growth that is now projected by Wall Street for the company’s Q1 2020 performance is nothing short of another increase. It is estimated that the company will get earnings per share of $0.82 on revenue of $20.5 million. This projected outlook for Q1 2020 represents a year-over-year increase of 149% and 223%, respectively.
Why do we recommend Innovative Industrial Properties as a strong cannabis stock for 2020?
In the end, the company is a cannabis company, however, Innovative Industrial Properties does not handle the cannabis itself and instead, its tenants are direct cannabis operators. An investment into Innovative Industrial Properties could be considered as the perfect parallel cannabis investment as the company’s performance is based on the income generated from leases and is not solely dependent on the cannabis market.
For these reasons, we believe that an investment into Innovative Industrial Properties at or close to its current price of $98.13 is a good cannabis stock investment opportunity for 2020. The company isn’t dependent on the price of cannabis, or even the demand for cannabis, as it solely focuses on real estate ownership and generating revenue by leasing access to its properties.
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