This Is The Best Marijuana Stock To Buy In December
While all eyes are on tech stocks, it’s marijuana that could give tech a run for its money in the growth department over the next decade. According to the estimates of the financial services company Canaccord Genuity, US legal pot sales set to double between 2020 and 2024 to 30 billion dollars. Some Wall Street analysts predict that legal weed sales in the United States could reach around $75 billion per year by 2030. This meteoric growth is sure to grab the attention of investors.
Unfortunately, not all marijuana stocks can be winners. We have seen several North American (mostly Canadian) pot stocks stretch their balance sheets or make bad decisions.
However, the top marijuana stock buy in december fell into none of the traps that largely plagued early players in the industry. If you’re looking for superior growth prospects from a predominantly unknown gem in the cannabis space, now seems like the right time to buy a Vertically Integrated Multi-State Operator (MSO) Jushi Holdings (OTC: JUSHF).
The Biggest Challenges Newcomer Jushi May Face
There’s a long list of reasons why I think the small cap stocks Jushi belong in investors’ portfolios, but first I’ll go over some of the challenges the company will face going forward. Remember that no matter how perfect an action, there are always obstacles and X-factors to overcome.
The biggest concern for shareholders will likely be the prospect of continued stock-based dilution. As cannabis is still federally illegal in the United States, access to basic financial services is not always guaranteed. This means that marijuana-focused companies will often turn to equity offerings (sometimes with warrants included) to raise capital.
In Jushi’s case, he sold 11.5 million shares in October at C$3.55 (US$2.73), raising C$40.8 million (about $29 million) in the process. . With the ambition to open new outlets and potentially make follow-on acquisitions, it is entirely possible that additional capital will be required (i.e. more dilutive stock offerings).
Jushi will also have his work cut out for him to stand out from the crowd. Despite rapid, sequential quarterly sales growth and a positive first quarter of adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), the company is losing quite a bit of money: $55.2 million in the first nine months of 2020. While to be expected from a relatively new operation, a number of other MSOs should become profitable on a recurring basis in early 2021, if not in the current quarter. Having been burned by Canadian pot stocks, investors have little tolerance for large losses in the cannabis space.
Now that you understand some of these risks at an early stage, let’s take a closer look at the countless reasons why Jushi should be on your shopping list.
Here’s Why Jushi Is The Best Cannabis Stock To Buy Now
The Jushi management team has chosen very interesting target markets. It has a presence or assets in seven states, with a concentration on three states: Pennsylvania, Virginia and Illinois. All three are limited license states, meaning they only approve a predetermined number of dispensary license applications. Focusing on these limited license states, Jushi is take advantage of a high or impenetrable barrier to entry, which should enable the company to capture significant market share.
There is plenty of room for growth. The company has a dozen operational dispensaries, but holds licenses to open around 30 outlets. The goal is to have 15 stores in total in Pennsylvania, six in Virginia and four in Illinois. From $205 to $255 million in full-year sales According to the company’s 2021 forecast, $182 million to $215 million is expected to come from those three states, with Pennsylvania’s $95 million to $110 million stealing the show.
A little research on the company’s income statement reveals that Jushi is much closer to profitability than its net losses would indicate. Excluding changes in fair value and one-time costs and benefits, the company’s gross profit of $11.03 million in the third quarter compares quite favorably to $11.93 million in total expenses. Sure, Jushi still lost around $906,000 on a purely operational basis, but that’s not bad at all considering the amount he’s reinvesting in his business as he opens new locations and prepares for the next season. medical cannabis industry in Virginia. Strip out one-time costs like changes in the fair value of derivative warrants, and you’ll see a business that could reach operational and recurring profitability as early as next year.
Jushi is expected to see its full-year sales rise from less than $80 million in 2020 to the aforementioned range of $205 million to $255 million in 2021. Although price-to-sales ratios aren’t too relevant in the early stages of a rapidly growing company, the midpoint of Jushi’s 2021 forecast ($230 million) puts Jushi just 1.6x next year’s sales. According to the estimates of set of facts, Jushi is on track for $340 million in sales by 2022, which is 1.1x sales. The company is incredibly cheap for a growth stock.
The management team of the company is another point to consider. As noted, capital raises are quite common for companies in the cannabis industry. What you might not realize is that of the roughly $250 million raised since its inception, $45 million came from insiders and founders. Those responsible are literally put their money where their mouth is, which should give investors additional confidence that management is steering the company toward long-term profitability.
Finally, don’t overlook Jushi’s acquisition strategy as an additional growth driver. An acquisition is how Jushi got into Illinois. It also acquired a grower-processor license from Vireo Health International in August for a total consideration of up to $37 million. This purchase includes a 90,000 square foot grow facility, half of which is designed for higher quality indoor production.
The stage is set for Jushi to shine.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.