The cannabis industry is growing quickly, and investors are taking notice. These 2 stocks could double (or more) in the next year.
The cbd stocks to watch are two companies that have been on the rise recently. These 2 cannabis stocks could double (or more), says analyst.
The cannabis business in the United States has exploded in recent years, with 36 states legalizing the drug for medicinal or recreational use, or both, and many more decriminalizing it. Cannabis remains an illegal drug at the federal level, although federal law also prevents prosecution of users who follow local state laws.
However, the sector is confronting a variety of challenges, the most severe of which is political. This, like so many other headwinds these days, stems from Washington’s political gridlock. Because Congress and the Biden Administration are having difficulty passing significant legislation, second-tier objectives, such as cannabis legalization, are taking a back seat.
This hasn’t prevented the business from making money. Revenues are increasing as businesses extend their sales operations into as many states as possible, both in the medicinal and recreational sectors, as well as any other miscellaneous and incidentals that cannabis manufacturers may think of. Long-term investors are still hopeful that cannabis will be legalized in the United States over the next several years.
As a result, Pablo Zuanic, a Cantor analyst, is optimistic about the cannabis industry’s long-term prospects. He believes that most of the current grow businesses have lots of room for growth, and that two of them have the potential to quadruple in value – or more. We looked up the data on those two companies on the TipRanks platform and discovered that they both had Strong Buy recommendations according to the expert consensus.
Cannabis is really amazing (TCNNF)
Let’s start with Trulieve Cannabis, a significant participant in the medicinal cannabis industry in the United States. This Florida-based business uses a’seed to sale’ strategy, beginning with 2.2 million square feet of production space and expanding to more than 100 locations throughout six states. Trulieve’s dispensaries serve over half a million patients in the United States and provide over 900 items across four brands.
Trulieve recorded sales of $215.1 million in the second quarter of this year, increasing 9.7% sequentially and 60 percent year over year. The company’s EPS was 32 cents, up from 4 cents in the previous quarter by a factor of eight.
Earnings and revenue growth have been accompanied by an expansion of the company’s sales presence. Trulieve has over 100 dispensary sites throughout the United States, and has just announced the opening of many additional outlets in Florida. Trulieve has offices in California, Connecticut, Massachusetts, Pennsylvania, and West Virginia, in addition to its home state.
Trulieve stated earlier this month that it would purchase Harvest Health & Recreation, a combination that will make Trulieve the biggest cannabis business in the United States. In the second quarter, the two businesses generated approximately $317 million in sales and had a combined cash liquidity of $360 million. It will be a stock-for-stock transaction.
Zuanic, who covers Trulieve, believes the company’s success is built on a strong foundation in its home state of Florida. “We anticipate the business to defend market share in its home state,” he adds. We realize that the discount levers have been tactical, focusing on SKUs with higher price sensitivity. With the Midway plant at capacity, the firm could gain from the new processing center in Tampa in 4Q, which should improve margins and SKU innovation. The business continues to develop; since March 13, it has added 13 shops, while Harvest has grown from six to thirteen (combined, the two companies account for 55 percent of stores established in the state since March 31).”
To that end, Zuanic ranks Trulieve as an Overweight (Buy) stock and calls it a “great choice.” His price objective of $81 implies a 173 percent gain over the following year.
Based on 5 recent favorable evaluations, the Strong Buy average rating for this stock is unanimous. The stock is now trading at $29.57, and the average target price of $61.81 indicates a 109 percent one-year gain.
Curaleaf is the next company on the list, and it’s another cannabis business behemoth. Curaleaf has 111 dispensaries in 23 states and 23 cultivation sites with a total grow capacity of around 2 million square feet. Curaleaf has 2,000 wholesale customers and develops its goods via 30 processing facilities. Curaleaf has an industry-leading market value of nearly $6.9 billion, whereas Trulieve has the most grow facilities and shops.
Curaleaf’s revenue for the second quarter was $312 million. This was a 166 percent increase year over year, and it was the ninth straight quarter of revenue growth. However, the company’s EPS was a net loss of one penny per share. This was better than the 3-cent EPS loss in Q1 and on par with the net loss in 2Q20. The EPS loss followed the company’s usual trend of a deep loss in Q4 followed by a modest loss in Q1 and Q2.
Curaleaf finalized the purchase of Los Suenos farms, Colorado’s biggest outdoor grow facility, this month, in a significant step to extend its presence. Curaleaf now has a total of 66 acres of outdoor cultivation and an indoor facility with 1,800 plants thanks to the purchase. Two retail cannabis shops that cater to adult recreational consumers are also featured. Curaleaf’s access to Colorado’s $2.2 billion cannabis industry has improved as a result of the relocation.
Curaleaf’s ongoing expansionary efforts, according to Zuanic, are a significant issue here. “The business has numerous cultivation expansion projects underway (FL, AZ, PA, NJ, NY) and intends to add another eight shops this year,” he writes (in FL, AZ, NJ, and PA). It aims to have 60 shops in Florida by YE22, up from 37 now (opening 4-6 this year). A large portion of the additional growth will occur late in 4Q21 (helping margins) and in 1H22. The ability to expand in places like New York will be contingent on regulatory certainty (caps on canopy; timing of NY rec sales start, which is now expected by 1Q23 by management in NY). By the fourth quarter, it aims to be cash flow positive…”
Based on the above, Zuanic rates Curaleaf stock as Overweight (Buy) with a $24 price target. The upside potential for this goal is a staggering 110 percent.
Curaleaf, like Trulieve, has a unanimous Strong Buy consensus rating based on nine recent analyst evaluations. The stock is now trading at $11.39, with a $22.44 average target price implying a 97 percent gain from that level.
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