While high-growth tech stocks receive the most attention on Wall Street, it’s frequently overlooked that the cannabis business is developing at a comparable rate, if not faster, than some of the more popular tech trends.
Given the industry’s prospects, these fast-growing firms are now priced extremely aggressively, thanks to the fact that most marijuana stocks have been trapped in a 13-month decline. We also understand that not every company in a fast-growth movement will be successful.
The good news is that there are a number of pot stocks to invest in, with each offering something unique. Here is the best marijuana company for investors to buy hand over fist, as well as one cannabis firm to stay away from at all costs.
The pot stock you should invest in hand over fist: Trulieve Cannabis
What could be more appropriate than beginning with the most marginally profitable marijuana stock in North America, Trulieve Cannabis.
What has enabled Trulieve Cannabis to set itself apart from the competition is its growth strategy. While most MSOs were opening a few dispensaries and cultivation facilities in as many legal states as possible, Trulieve was extremely focused on medicinal marijuana-legal Florida. The Sunshine State houses more than 110 of the businesses’ approximately 160 operational dispensaries (not including cultivators).
The allure of flooding the Florida market with marijuana dispensaries is twofold. First, as one of the most lucrative states for cannabis sales by 2024, the Sunshine State appears to be a good bet. Second, saturating the state means less money spent on marketing to promote brand recognition. As a result, Trulieve has captured roughly half of Florida’s dried marijuana flower and oils market share, and it has earned recurring profits every quarter for over three years because to its low marketing expenditures.
When Trulieve Cannabis completed the largest U.S. cannabis transaction in history last year, it not only sent tremors through the industry, but also made waves that continue to this day. The acquisition of Maryland-based MSO Harvest Health and Recreation gives Trulieve a presence in the mid-Atlantic part of the United States and more significantly, puts it in first place with regard to Arizona’s market share, which Harvest Health called home. In November 2020, Arizona voters approved adult-use weed sales under state law; sales began two months later.
Despite the fact that Trulieve is anticipated to maintain an annual double-digit growth rate until at least mid-decade, it can now be purchased for 20 times Wall Street’s projected 2022 earnings.
The marijuana stock you should avoid: Aurora Cannabis
The most dangerous marijuana stock to own is Canadian licensed producer Aurora Cannabis, which is on the low end of the spectrum.
Aurora Cannabis was a hot topic in the cannabis world in 2018-2019. It eventually built 15 production sites that, if fully operational, can produce more than 600,000 kilos of cannabis every year. The business planned to become an exporting maven and a domestic powerhouse by reducing its production costs dramatically with lower expenses.
But it’s 2022, and the firm’s expectations have not materialized.
Aurora has been hampered by national regulators in Canada. The company’s initial cultivation and sales licenses were delayed by federal authorities. However, the main problem has been a mix of COVID-19 and sluggish retail licensing approval in Ontario, the most populous province. And without federal cannabis legalization in the United States, Aurora will have no chance of entering the considerably more lucrative American market.
Another problem that Canadian marijuana stocks have encountered is that customers have flocked to value brands. The demand for expensive dried flower and derivatives has proven unsuccessful. As a result, the avg. sales price each gram for most licensed producers in Canada has been declining for years.
There are the wounds that have been self-inflicted as well. Aurora Cannabis has committed billions of dollars worth of errors in acquisition judgments, with numerous acquisitions contributing to a loss of nearly $1 billion. In order to reduce costs and curb its ongoing cash drain, the firm has closed five smaller factories and halted construction on additional facilities.
Finally, in addition to stretching out its operations, Aurora Cannabis has a history of overpaying and diluting investors. Because the firm isn’t generating profits, it’s using share issuances to pay for acquisitions and day-to-day activities. Between mid-2014 and December 31, 2021, Aurora’s outstanding share count grew from 1.3 million (reverse split-adjusted) to 198.4 million, with shareholders having little chance of profiting as a result of such excessive dilution.
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