HITI - 7 Most Undervalued Marijuana Stocks to Buy Now
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“It could be a decisive year for cannabis;” I’ve heard that phrase many times before; it’s typically wishful thinking. 2022 though, is likely to be different and could be a major breakthrough for the industry. Moreover, with the market in a downturn, it’s perhaps the best time for investors to pick up undervalued marijuana stocks.
That notion stems from the fact that the mid-term elections are coming up, and the House could probably flip. Moreover, it’s known that the GOP leadership hasn’t been too keen on cannabis legalization at the federal level.
If we read through a recently published newsletter from Marijuana Moment, you’d get an understanding of how animated lawmakers have been in advancing cannabis protections. Having said that, let’s look at seven of the most enticing marijuana picks at this time.
VRNOFVerano Holdings$6.7CRONCronos Group$3.04CRLBFCresco Labs$3.66GRWGGrowGeneration$4.82HITIHigh Tide$1.56IIPRInnovative Industrial Properties$92.19GTBIFGreen Thumb Industries$10.03Verano Holdings (VRNOF)
Verano Holdings (OTCMKTS:VRNOF) is one of the most profitable vertically integrated cannabis players in the U.S. It has 16 active licenses across 15 production facilities and over 100 retail locations. VRNOF is among the five most popular cannabis retailers in terms of sales.
Verano has done incredibly well in expanding its business through its effective mergers and acquisitions strategy. Inorganic revenues have contributed the most to the triple-digit increase in its year-over-year revenue growth. Moreover, it has funded its capital expenditures by its mounting free cash flow balance.
Additionally, its margin profile is unbelievable, with double-digit growth in its free cash flow, EBITDA, and gross margins. Despite its strong performance of late, VRNOF stock trades at roughly 2 times forward sales, significantly below the sector average.
Cronos Group (CRON)
Cronos Group (NASDAQ:CRON) is one of the top cannabis players in the Canadian market that have grown immensely over the past few quarters. It’s finally chalked out a plan for meaningful business progress, as shown in its recent results.
It recently released solid first-quarter results, where sales came in at a tremendous $25 million, representing almost a 100% growth from the prior-year quarter. Growth in its medical marijuana sales from Israel continues to strengthen its market share, while its performance in the local adult-use market is also growing rapidly.
Moreover, it has also increased its market share across vapes and gummies. Net losses have also declined steadily from $161.6 million in the prior year to $32.7 million this year. Also, it has close to $1 billion in cash on its balance sheet, which it can use to continue to pursue its expansion plans.
Cresco Labs (CRLBF)
Cresco Labs (OTCMKTS:CRLBF) is a U.S.-based cannabis giant which has been one of the most consistent businesses in the sector. It ended last year with a whopping 73% year-over-year growth in sales to $822 million. Moreover, its adjusted EBITDA has shot up 219% to $194 million.
It’s been the talk of the town after announcing its acquisition of New York-based cannabis operator Columbia Care. Once it acquires its assets, Cresco will operate over 130 dispensaries. The acquisition is likely to reduce costs through synergies.
Though the company isn’t profitable yet, its strong performances suggest that it won’t take too long. Moreover, it has over $220 million in cash, which it can use for further expansion.
GrowGeneration (GRWG)
GrowGeneration (NASDAQ:GRWG) is a leader in the production of cannabis through its cutting-edge hydroponics systems. Hydroponics is a system that involves growing plants without soil, which can potentially yield 20% to 25% higher than a soil-based system.
GRWG sells its products through an effective mix of retail and eCommerce. It sells its products in its 62 hydroponic centers in the U.S., while its eCommerce business has been growing at a monstrous pace. Last year, sales from the segment shot up 241% to $36.2 million.
GRWG will likely experience a setback due to an oversupply of outdoor cannabis. Nevertheless, the future looks bright, as it continues to expand its garden centers with 23 acquisitions last year alone. It plans to open up multiple new locations in 2022 and take its store count past the 100 mark by next year. Hence, its growth strategy is highly encouraging and points to massive upside potential ahead.
High Tide (HITI)
High Tide (NASDAQ:HITI) offers its premium products and services to its cannabis customers with the goal of becoming a vertically integrated cannabis firm. It has built strong brand equity with a variety of CBD and THC brands, which have added to the diversity of its portfolio.
Consequently, the management should expect low volatility as it looks to target several geographies and segments. The company has partnered with multiple well-known artists and singers, offering promotions.
Naturally, these celebrities are offering licenses, expecting their business model to be highly promising. HITI has plans to increase its footprint to at least 150 locations and expand into new markets. If it can successfully execute its growth blueprint, it could look at solid revenue growth for years to come.
Innovative Industrial Properties (IIPR)
Innovative Industrial Properties (NYSE:IIPR) has generated massive growth for its investors over the past several years. It is in a unique position to access public markets, which is why its five-year returns are in excess of 585%.
Moreover, it offers over 6% dividend yield, with a payout ratio of over 100%. A massive shortage of industrial property supply for medical-use cannabis makes IIPR a tremendous bet. It has some unique competitive advantages in terms of higher capacity, better access to financing, and other related benefits.
Moreover, it has expanded its base by acquiring new properties each year. This year, it bought out six properties and will continue expanding its footprint over the next several years. Legalized marijuana production is likely to grow at an incredible pace of over 25% annually over the next decade, which points to strong upside potential for IIPR.
Green Thumb Industries (GTBIF)
Green Thumb Industries (OTCMKTS:GTBIF) is a top-tier cannabis operator in the United States. It is a leading operator with a wide footprint in over 15 states.
Most of the states it operates in have a strong adult-use market, such as Nevada and California, along with medical-only markets such as Florida and Pennsylvania. The legal cannabis business in the U.S. continues to grow rapidly, with roughly 70% of the population green-signaling legalization.
One of the key aspects that separate GTBIF from its peers is its ability to bring in cash consistently. Its operating cash flows have treaded northward over the past few years, allowing it to grow its cash till by an enormous 360% from 2019 to 2021. Cash flows are a precursor to net income, which is why GTBIF has one of the strongest bull cases in the sector.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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