Green Wave Election Shines Spotlight on Weed Stocks (IIPR, GTBIF, SGMD, TCNNF)

We are now just days away from an election that promises to be divisive in almost every respect for America but one.

Americans are polarized and divided across basically every major issue, with a culture war of unprecedented depth coming to a head in what promises to be a deeply contentious election night on November 3. But there’s one thing that everyone seems to agree on: weed is a consumer product, rather than an illegal narcotic. At least, that’s the consensus among analysts heading into the casting of ballots, where five states (both red and blue) are expected to move toward further legalization.

If true, it would represent the third straight “green wave” election, and take us closer and closer to a seemingly inevitable national decriminalization, which has already been stated as part of the Biden/Harris platform, with Biden now surging in the polls toward a possible landslide victory.

With that in mind, pot stocks could be on the menu for some momentum gains ahead. Hence, we take a look here at a handful of compelling names in the space, including: Innovative Industrial Properties Inc (NYSE:IIPR), Green Thumb Industries Inc (OTCMKTS:GTBIF), Sugarmade Inc (OTCMKTS:SGMD), and Trulieve Cannabis Corp (OTCMKTS:TCNNF).

Innovative Industrial Properties Inc (NYSE:IIPR) is interesting in this context given its unique positioning in the marketplace. The company is a self-advised Maryland corporation focused on the acquisition, ownership and management of specialized properties leased to experienced, state-licensed operators for their regulated medical-use cannabis facilities.

The company touts itself as the first and only real estate company on the New York Stock Exchange focused on the regulated U.S. cannabis industry.

Innovative Industrial Properties Inc (NYSE:IIPR) just recently announced that it entered into an amendment of the lease with a subsidiary of Green Thumb Industries Inc. in Toledo, Ohio, making available an additional $25.0 million in funding for the construction of a cannabis cultivation facility, which is in addition to the existing medical cannabis processing facility on the property.

According to the release, the lease amendment also adjusted the base rent under the lease to take into account the additional available funding and extended the term of the lease agreement. Assuming full payment of the additional funding, IIP’s total investment in the property will be $32.2 million. In addition to this facility in Toledo, Ohio, IIP owns and leases to Green Thumb’s regulated cannabis cultivation and processing facilities in Oglesby, Illinois and Danville, Pennsylvania. Assuming full reimbursement of tenant improvements under the leases, IIP’s total investment in properties leased to Green Thumb is expected to be $121.8 million.

The stock has suffered a bit of late, with shares of IIPR taking a hit in recent action, down about -4% over the past week.

Innovative Industrial Properties Inc (NYSE:IIPR) managed to rope in revenues totaling $24.3M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 182.5%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($384.9M against $0).

Green Thumb Industries Inc (OTCMKTS:GTBIF) bills itself as a company that manufactures and sells various cannabis products in the United States. The company’s cannabis products include flower, concentrates for dabbing and vaporizing, edibles, and topicals.

According to company materials, “Green Thumb Industries (GTI), a national cannabis cultivator, processor and dispensary operator, is dedicated to providing dignified access to safe and effective cannabis nationwide while giving back to the communities in which they serve. As a vertically integrated company, GTI manufactures and sells a well-rounded suite of branded cannabis products including flower, concentrates, edibles, and topicals. The company also owns and operates a rapidly growing national chain of retail cannabis stores called RISE(TM) dispensaries. Headquartered in Chicago, Illinois, GTI has seven manufacturing facilities and licenses for 50 retail locations across seven highly regulated U.S. markets. Established in 2014, GTI employs more than 350 people and serves hundreds of thousands of patients and customers each year. GTI was named a Best Workplace 2018 by Crain’s Chicago Business.”

Green Thumb Industries Inc (OTCMKTS:GTBIF) just announced it opened Rise Monroeville, its 49th retail location, on October 21. According to the release, profits from the first day of sales will be donated to 412 Food Rescue, a non-profit that works with food retailers, wholesalers, restaurants, caterers, universities and other food providers to rescue unsellable but perfectly good food and provide it to nonprofit organizations that serve those experiencing food insecurity.

“We are thrilled to open the 13th Rise™ store in Pennsylvania as we continue to create jobs across the state,” said Green Thumb Founder and Chief Executive Officer Ben Kovler. “The team is also honored to support 412 Food Rescue’s important work of collaborating with community businesses and organizations to help eradicate hunger, especially during these difficult times.”

If you’re long this stock, then you’re liking how the stock has responded to the announcement. GTBIF shares have been moving higher over the past week overall, pushing about 4% to the upside on above average trading volume.

Green Thumb Industries Inc (OTCMKTS:GTBIF) generated sales of $165.8M, according to information released in the company’s most recent quarterly financial report. That adds up to a sequential quarter-over-quarter growth rate of 20.1% on the top line. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($113M against $181.8M, respectively).

Sugarmade Inc (OTCMKTS:SGMD) is a major stakeholder in its BudCars cannabis delivery business, which has driven the lion’s share of the company’s growth over recent quarters.

This is likely to be a strong source of new strategic growth for a company that has already been posting sequential monthly growth above 30% on the topline for several consecutive months after making its flagship investment in BudCars.

The company has also recently announced its plans to expand its BudCars service into new territories in the North Bay, Wine Country, and LA Metro regions, which could sharply expand its growth potential.

Sugarmade Inc (OTCMKTS:SGMD) can be seen as the most speculative name in this list. But it is also rapidly growing and decidedly cheap on a nominal basis, with shares now trading under a penny.

The company’s most recent release points out its strong results for the three months ended Sept. 30, 2020, which featured steadily strong gross margins, nearly $2 million in gross receipts, and more than 60% growth in net sales, customer orders and gross profits on a sequential quarterly basis.

According to the release, total Sept/Q BudCars gross receipts over $1.9 million ($1.55 million, net of sales taxes), representing 66% quarter over quarter sales growth, total Sept/Q BudCars gross profits of $903,667, representing 64% quarter over quarter gross profit growth on steady 47% gross profit margins, average daily gross sales increased 68% Q/Q to $21,246, and total customer tickets increased 62% Q/Q on 3% growth in average ticket size.

“BudCars continues to perform, setting records in basically every key metric we track,” stated Jimmy Chan, CEO of Sugarmade. “It was a tremendous quarter, with a big jump in customers and regional market share and robust margins on every sale. That paints a very motivating picture as we gear up to significantly expand our service territory, with upcoming expansion into the North Bay and Wine Country areas, as well as our upcoming grand opening of BudCars LA.”

Sugarmade Inc (OTCMKTS:SGMD) could be an interesting opportunity given this robust growth data and its stated plans to expand strategically and geographically. In a context that may favor the space, this stock may merit further due diligence given where shares trade now. The current top-line run rate suggests an annualized potential that adds up to a valuation around 0.25x forward sales, which is about a tenth of the level we see in other stocks in the space.

Trulieve Cannabis Corp (OTCMKTS:TCNNF) is one of the biggest and most successful US cannabis MSO’s, offering a suite of branded products with approximately 125 SKUs, including nasal sprays, capsules, concentrates, syringes, and cannabis flower in tamper-proof containers for vaporizers, topical creams, tinctures, and vape cartridges.

According to company materials, the company is a vertically integrated “seed to sale” player operating as the first and largest fully licensed medical cannabis company in the State of Florida. Trulieve cultivates and produces all of its products in-house and distributes those products to Trulieve branded stores (dispensaries) throughout the State of Florida, as well as directly to patients via home delivery.

Trulieve Cannabis Corp (OTCMKTS:TCNNF) just announced the opening of a brand-new Florida dispensary, the Company’s 65th nationwide. According to the release, the new Bradenton dispensary will be the second Bradenton location to bring the Company’s wide-ranging catalog of medical cannabis products directly to patients across Manatee County. Located on Manatee Avenue West, the new dispensary supports Trulieve’s goal of expanding and ensuring direct, reliable patient access to medical cannabis across its home state of Florida. It joins the Company’s 62 other dispensaries statewide, including the original 14th Street Bradenton location, as well as those in nearby St. Petersburg, Sarasota, and several more throughout the Tampa Bay area.

“The Bradenton community in particular has been incredibly supportive of us since we opened our first location here in 2017. We look forward to being a part of this community for years to come,” said Trulieve CEO Kim Rivers. “From our first store in Florida, our focus has remained on expanding access to the safe and reliable medications patients ask for, and we continue that today with our 63rd store in the state.”

The context for this announcement is a bit of a bid, with shares acting well over the past five days, up about 11% in that timeframe.

Trulieve Cannabis Corp (OTCMKTS:TCNNF) pulled in sales of $167.3M in its last reported quarterly financials, representing top line growth of 115.9%. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($204.7M against $136.3M).

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