Cannabis Companies Entered 2021 With A Bang

The Democratic win that joined the wave of state legalization is encouraging for the cannabis market. Based on their most recent quarterly filing, Canopy Growth Corp CGC, Cronos Group Inc CRON, GW Pharmaceuticals PLC GWPH, Aphria Inc APHA that announced it will merge with Tilray Inc TLRY in mid-December and Trulieve Cannabis Corp TCNNF, entered 2021 with the most cash on their balance sheets.

But other stocks such as Curaleaf Holdings Inc CURLF, Cresco Labs Inc CRLBF, Planet 13 Holdings Inc PLNHF, Innovative Industrial Properties Inc IIPR and Green Thumb Industries Inc GTBIF show a lot of potential as well, along with several powerful small caps.

Being Cash-Rich Is Not Is As It Seems

Aphria is yet to produce a net profit but it is in a great position to expand into the U.S. market as mass legalization continues. Another catalyst for growth is its announced $4 billion merger with Tilray.

Canopy Growth, the largest pot stock in the world, is once again the cannabis cash king with $1.37 billion in cash. The bulk of its cash came from multiple rounds of equity investments from spirits giant Constellation Brands, Inc. STZ. While $1.37 billion in cash might sound fantastic, this is actually down by more than $2 billion compared to November 2018, which is when the large equity investment from Constellation Brands closed. Unfortunately, Canopy Growth is losing a lot of money, so its cash-rich position isn't as secure.

Canadian licensed producer Cronos Group the second-most cash-rich pot stock. But like Canopy Growth, its cash of $1.3 billion is actually down from the previous year.

GW Pharmaceuticals ended the third quarter with a hearty $480 million but having plenty of cash is a must for companies that develop cannabinoid-based treatments due to the clinical, preclinical, and discovery-based costs, not to mention the success rate of trials. The good news is the company appears ready to turn the corner to profitability in 2021 thanks to its lead drug Epidiolex.

U.S. multistate operator Trulieve Cannabis Corp TCNNF entered the year with $193 million in cash on its balance sheet and it is generating the most robust cash flow of any pure-play company. Its success is owed to its willingness to stay laser-focused on the sunshine state. Out of its 75 operational dispensaries in total, 70 of which are located in Florida, allowing effectively build up its brand without overspending on marketing. As Florida is expected to legalize the use of recreational marijuana, there is significant room for growth even within its circle, not to mention if the company decides to go for the other states.

Other Stocks Worth Watching

Curaleaf is a cannabis pure-play stock. With 93 locations across 23 states, it focuses on medical cannabis and even developed one of the first vaporizers for a medical dose.

The company is also marking its territory in the recreational pot sector with its vertically integrated business model offering a lot of potential.

Another medical marijuana stock at the top of its game is Cresco Lab. With undergoing legalization, its massive footprint across the nation provides a great opportunity for growth. Revenue in its previous quarter grew an impressive 326.6% YoY.

Planet 13 plans to expand its footprint in high-growth markets across the nation with its previous quarter sales already going up 36%, followed by EBITDA's 84% growth.

Green Thumb Industries produces medical and recreational marijuana that is sold across the nation. Revenue growth was 131% YoY.

For all those risk-averse investors, Innovative Industrial Properties may be a safe bet as it is not a traditional pot stock. As a real estate investment trust, the company rents out properties to medical cannabis producers, managing some 64 properties in 2020. Its major advantage is its unique position in the market that provides a massive opportunity for expansion, given that nearly half the states in the U.S. have legalized medical marijuana. Adding to this is its successful sales-leaseback program which has helped it keep cash levels high during the pandemic.

Small Caps

There are several small caps that could end up disrupting the cannabis market. Khiron Life Sciences Corp KHRNF is a pureplay health and wellbeing cannabis company from Latin America. Its unique patient focus combines a traditional pharma approach, wholly-owned clinics, and telehealth solutions that have the potential to bring medical cannabis to the next level.

Clever Leaves Holdings Inc CLVR went public through a SPAC in December. Although known for its medical cannabis presence in Colombia but it has a global cultivation footprint. It also has a supply agreement with Canopy Growth.

HempFusion Wellness Inc CBD a full spectrum CBD company that utilizes a hemp plant with four brands in its portfolio just had its public debut as it is aggressively expanding into doctor/practitioner and convenience channels.

Avicanna Inc AVCNF, a Toronto-based vertically integrated biotech biopharmaceutical company whose cosmetics, medical and pharmaceutical products are present in present also in the US, Europe and LATAM.

Takeaway

As far as cannabis legalization in the United States goes, there are still many obstacles to overcome. Additionally, the new administration will have their hands full trying to end the pandemic and tackle the devastated economy. But, there is still a lot of optimism for the cannabis industry that could result in a green light. The above companies are well-positioned to benefit from any kind of boost.

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