The performance of marijuana as an industry as a whole was trending well below the S&P 500 for most of the previous 12 months. But the elections, which featured several states making recreational and medical use of cannabis legal, gave a nice increase to the business.
Since then, the Horizons Marijuana Life Sciences ETF has popped almost 149%, and it’s higher now by around 80% in the past year, compared to the almost 17% returns of the S&P 500. Two pot companies have performed well over these 12 months. They are Planet 13 (OTC:PLNH.F) and Trulieve Cannabis (OTC:TCNNF).
There are good reasons to believe these companies will keep outperforming the market not only throughout 2021 but also in the long-term. Read on to find out why.
Florida brings in billions
Trulieve Cannabis has put most of its focus on Florida’s market, and there are advantages to this strategy. Cannabis is illegal at the federal level, so it is not legal to transport it from state to state. Many pot companies have attempted to create a strong presence in numerous states by owning entire supply chains in each, but doing that can strain a business’s resources.
Trulieve Cannabis instead focuses on the one state of Florida. And this has strategy has done wonders so far. The company currently owns 70 dispensaries in the State, and an impressive 52% market share.
Trulieve Cannabis reported revenue of $136.3 million in its third quarter, a 93% increase. The company also had a net income — a rare thing in the marijuana business — of $4.7 million. The company’s operations are booming. They have a great retention rate of 79% — which means they have very loyal customers — while same-store sales increased 19% year over year. The pandemic has done little to slow down the company.
Meanwhile, Florida’s cannabis demand is estimated to keep expanding at a compound growth rate of 25.3% through 2025. And Trulieve Cannabis’ strong foundation in Florida will let it reap the rewards of this growth. Investors wanting to cash in on cannabis should seriously consider adding this marijuana stock to their portfolios.
A unique business
According to an Expedia poll, 74% of Americans prefer experiences over products. Planet 13 is creating its brand around this idea. The company is based in Las Vegas, where recreational use of pot is completely legal. But Planet 13 does more than just sell pot to its customers.
The company’s store, which is located near the Las Vegas strip, is a tourist attraction for cannabis lovers or the cannabis curious. Visitors can watch Planet 13’s production process and purchase cannabis at the same time. They also have a restaurant and a facility for special occasions.
Planet 13 performed well during Covid. In their third quarter, the company brought in $22.8 million in revenue, which is a 36.5% year-over-year growth, and this despite being at only 50% capacity. Meanwhile, Planet 13 also recorded a net income of $0.2 million, compared to their net loss of $1.7 million last year.
Two drivers of growth might help this company continue to soar. First, Nevada’s market is estimated to grow at 16.9% through the year 2025. And Planet 13 accounts for around 9% of the total pot sales in the state.
Second, they are planning to build superstores in more high-profile cities, including New York, San Francisco, Miami and others. If the company replicates their success in Las Vegas elsewhere, there is no limit to how high they can go. With these opportunities available, Planet 13 looks like it will deliver market-beating profits in the long run.
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