Amid widespread legalization, increasing sales, and growing medical and recreational usage, the cannabis industry continues to attract the limelight. In fact, last month, Senate Majority Leader Chuck Schumer said on the floor of the upper chamber that he hopes to see an end to marijuana’s prohibition by next year’s 4/20. Now that federal decriminalization is up for discussion, pot stocks’ prospects look bright.
In just the past seven months, conservative Mississippi, Montana, and South Dakota, along with state legislatures in New York, New Mexico, and Virginia, have approved bills to legalize cannabis for recreational use. With more lawmakers from Delaware to Minnesota working on ending the prohibition, the cannabis industry has the potential to gain more momentum. Also, a growing awareness of the medicinal benefits of cannabis, and surging demand for plant-based treatments in pain management, are among the key factors that are expected to drive the industry’s growth. In fact, the cannabis market is estimated to grow at a 28.0% CAGR over the next 5 years to reach $90.4 billion.
Given these industry tailwinds, Wall Street analysts are placing huge bets on cannabis stocks. Specifically, they expect financially strong stocks Green Thumb Industries Inc. (GTBIF), The Supreme Cannabis Company, Inc. (SPRWF), and CV Sciences, Inc. (CVSI) to rally by more than 50% over next 12 months.
Click here to check out our new Cannabis Industry Report for 2021
Green Thumb Industries Inc. (GTBIF)
GTBIF is a manufacturer and seller of medical and adult-use cannabis in the United States. It is also a retailer and owner of the Rise Dispensaries. The company manufactures and distributes a portfolio of branded cannabis products that include Beboe, Dogwalkers, Dr. Solomon’s, Incredibles, Rhythm and The Feel Collection. GTBIF has 13 manufacturing facilities, licenses for 97 retail locations, and operations in 12 U.S. markets.
This month, GTBIF entered the Virginia cannabis market by signing an agreement to acquire 100% of Dharma Pharmaceuticals LLC that includes an existing production facility and retail dispensary. Not only will this help GTBIF increase its market base but should also allow it to serve Virginia’s patients and consumers and support the tremendous positive impact that the legal cannabis industry can have on local communities.
The company’s total revenue increased 89.5% year-over-year to $194.4 million for the first quarter ended March 31, 2021. Its adjusted operating EBITDA grew 179.3% from its year-ago value to $71.4 million. GTBIF reported $10.4 million in net income, indicating a 347.6% increase year-over-year. The company’s EPS came in at $0.05, compared with the prior-year quarter EPS of $0.02.
GTBIF is expected to generate 57.2% revenue growth year-over-year to $875.12 million in the current year, whereas its EPS is expected to grow 442.9% from the year-ago value to $0.38 in the current year. The stock has gained 193.5% over the past year.
All 12 analysts that rated the stock have rated it Buy. The $48.05 consensus price target represents a 74.2% potential gain from its last closing price of $27.59.
The Supreme Cannabis Company, Inc. (SPRWF)
Formerly known as Supreme Pharmaceuticals Inc., Canada-based SPRWF is a global diversified portfolio of distinct cannabis companies, products and brands. Since its establishment in 2014, the company has emerged as one of the world’s most premium producers of recreational, wholesale and medical cannabis products. Its recreational brand portfolio include 7ACRES, 7ACRES Craft Collective, Blissco, sugarleaf, and Hiway.
In March, SPRWF made an addition to its product line by launching THC gummies under its sugarleaf brand. Each sugarleaf gummy has a delicious combination of natural strawberry and peach flavors and contains a consistent dose of 2.5 milligrams of THC. These kinds of products have helped the company secure its position as a top-10 Canadian cannabis company.
SPRWF’s gross margin increased 112.9% sequentially in the third quarter ended March 31 to $4.94 million, while its gross revenue increased 52% from the year-ago value to $16.75 million. Its cash increased 221.6% sequentially to $65.55 million over this period.
Analysts expect the company’s revenue to rise 74.8% year-over-year to $52.02 million in the quarter ending June 2021. Over the past six months, the stock has gained 125.2%.
Of the two Wall Street analysts that have provided ratings for the stock, one has rated it Buy. Closing yesterday’s trading session at $0.25, its $0.39 consensus price target represents a potential upside of 52.3%.
CV Sciences, Inc. (CVSI)
Formerly known as CannaVest Corp., CVSI is a preeminent leader in hemp derived cannabidiol (CBD) products. It operates in two distinct business segments: a consumer product division and a specialty pharmaceutical division. The company’s PlusCBD products are sold at more than 7,300 retail locations throughout the U.S., and its PlusCBD Oil is considered the top-selling brand of hemp-derived CBD oil on the market.
This month, CVSI launched PlusCBD Calm and Sleep, two flavorful gummies that support healthy stress responses and sleep cycles for people getting back to their normal routines. This expansion in its line of PlusCBD gummies is aligned with its commitment to advance in the CBD industry.
The company reported a 48.7% gross margin in the first quarter, ended March 2021, versus its 48.5% gross margin of a year ago. Its operating expenses decreased 41.4% year-over-year to $5.47 million, while its cash balance increased 26.7% from the $5.7 million year-ago value. CVSI’s total retail distribution expanded to more than 7300 stores over the period, as compared to 5799 stores in the prior year quarter.
CVSI is expected to witness 50.3% revenue growth year-over-year to $32.79 million over the next year, whereas its EPS is expected to grow 60% in the current quarter ending June 2021.
Of the three analysts that rated the stock, one has rated it Buy. The $0.62 consensus price target represents a potential 74.7% increase from its last closing price of $0.35.
Click here to check out our new Cannabis Industry Report for 2021
GTBIF shares were trading at $27.84 per share on Thursday afternoon, up $0.25 (+0.91%). Year-to-date, GTBIF has gained 13.63%, versus a 11.34% rise in the benchmark S&P 500 index during the same period.
About the Author: Samiksha Agarwal
Samiksha Agarwal has always had a keen interest in financial markets. This has led her to a career as a financial journalist. Through her extensive knowledge of fundamental analysis, her goal is to help investors identify untapped investment opportunities in the stock market. More…
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