TLLTF - Budding Opportunities: Ancillary Cannabis Stocks Ready to Bloom

September, 08 2023 07:30 AM TILT Holdings Inc

2023-09-08 07:30:16 ET

Ancillary Cannabis Stocks for Long-Term Growth

According to some projections, the cannabis industry in the United States will reach more than $30 billion in legal sales by 2023. While federal legalization is still a long way off, more than two-thirds of states have legalized cannabis in some form. This state-level legalization has resulted in tremendous growth in ancillary companies that serve the cannabis sector without directly handling the plant.

For investors interested in the top marijuana stocks but concerned about federal uncertainties, ancillary cannabis stocks can provide exposure to the industry’s expansion. Companies involved in hydroponics, real estate, packaging, and online presence are among the top ancillary cannabis stocks to watch as we enter September.

From a technical analysis perspective, many ancillary cannabis stocks saw a pullback in early 2022 but appear to be establishing support and trending upward again. With the growth trajectory of the underlying cannabis industry still strong, several analysts see significant upside potential for select ancillary stocks over the next few quarters.

As the cannabis industry expands, ancillary businesses will likely see surging demand for their products and services. For investors, September could be an ideal time to evaluate top ancillary cannabis stocks in this niche segment of the market.

Top Picks: Best Ancillary Cannabis Stocks for Q3

WM Technology, Inc. ( NASDAQ: MAPS )
Leafly Holdings, Inc. ( NASDAQ: LFLY )
TILT Holdings Inc. ( OTC: TLLTF )

WM Technology, Inc.

WM Technology, Inc. (MAPS) is a leading technology and software infrastructure provider to the cannabis industry. Operating under the Weedmaps brand, the company provides the premier online marketplace for cannabis consumers and businesses. As of 2022, Weedmaps has over 18 million monthly active users and thousands of business listings across major markets in the United States, Canada, and Germany. Over 90% of licensed retailers in legal U.S. markets rely on its Weedmaps and WM Business software solutions.

With cannabis legalization expanding rapidly in North America, WM Technology is positioned to benefit as more consumers and businesses join the legal market. Its software tools aim to increase awareness, convenience, and compliance in the cannabis economy.

Second Quarter 2023 Financial Highlights

Revenue was $50.9 million as compared to $58.3 million in the second quarter of 2022 (“prior year period”).
Average monthly paying clients(1) was 5,609, as compared to 5,537 from the prior year period.
The average monthly revenue per paying client(2) was $3,022, as compared to $3,509 from the prior year period.
Net income was $2.0 million as compared to net income of $19.8 million from the prior year period.
Adjusted EBITDA(3) was $10.2 million as compared to $(0.6) million from the prior year period.
Basic and diluted net income per share were both $0.01 based on 92.9 million and 93.6 million of Class A Common Stock weighted average shares outstanding, respectively.
Total shares outstanding across Class A and Class V Common Stock were 148.9 million as of June 30, 2023.
Cash totaled $24.6 million as of June 30, 2023, with no debt.

MAPS Stock Performance

MAPS stock closed at $1.52 on September 7 ^th , up 31.03% in the last month of trading. The stock has a 52-week price range of $0.596- $2.81 and is up 50.50% year to date. According to analysts at CNN Business, MAPS stock has a 12-month average price target of $2.06 per share. In essence, this would represent an upside of 34.31% from its last trading price of $1.52.

Leafly Holdings, Inc.

Leafly Holdings Inc. creates and manages a platform that connects consumers to cannabis brands and approved merchants, as well as provides clients with cannabis-related information. The group operates the most reliable website for locating and purchasing cannabis products from certified sellers worldwide. Over 125 million people use Leafly each year to learn about cannabis and make online purchases from local businesses. Because of the organization’s considerable resources, including technology and advertising services, customers may make informed purchasing decisions. This helps cannabis businesses attract and keep repeat customers. Customers may now buy cannabis directly from the company’s website, owing to the online cannabis delivery service it began in May when it first opened its doors in California.

Second Quarter Financial Results

Revenue was $10.7 million, down 11% from Q2 2022.
Gross margin was 88%, consistent with Q2 2022.
Total operating expense was $10.2 million, a 48% reduction from $19.5 million in Q2 2022, reflecting continued focus and discipline in operating efficiencies.
Net loss for Q2 2023 was $1.4 million. Net income was $14.8 million for Q2 2022, which included a $24.4 million non-cash benefit from derivative liabilities.
Adjusted EBITDA was positive $0.1 million compared to adjusted EBITDA loss for Q2 2022 of $8.4 million.

Financial Outlook

Today, Leafly is issuing third-quarter 2023 guidance. Based on current business trends and conditions, the financial outlook is expected to be around $11 million in revenue and adjusted EBITDA loss to be about $0.5 million.

LFLY Stock Performance

LFLY stock closed on September 7 ^th at $0.6930, up 115.22% in the past month of trading. The stock has a range of $0.2340-$1.57 and is up 6.30% year to date. According to analysts at CNN Business, LFLY stock has a median price target of $1.00 per share. In this case, this would represent an upside of 43.91% from its last trading price of $0.6930.

TILT Holdings Inc.

TILT Holdings Inc., an international market specialist, may be able to assist cannabis entrepreneurs in developing a global brand. The companies’ primary markets include the European Union, the United States, Canada, Israel, Mexico, and South America. TILT, in particular, has a diversified portfolio of firms that provide manufacturing, production, hardware, and software to other well-known cannabis businesses. The company frequently provides the best inhalation device for cannabis-based treatments in the American and European markets.

Q2 2023 Financial Summary

Revenue was $41.6 million in the three months ended June 30, 2023, compared to $47.1 million in the prior year period, with the decrease primarily attributable to Jupiter driven by lower sales volume as well as a number of orders occurring, but not fulfilled, at the end of the quarter, and lower average price in certain product lines. This was partially offset by growth in the Company’s plant-touching business.
Gross profit was $4.0 million, or approximately 9.7%, in the three months ended June 30, 2023, compared to $10.9 million or approximately 23.3% in the prior year period. The decrease in gross margin was primarily due to a one-time inventory write-down across the Company’s markets. Excluding the write-down, the gross margin would have been 21.4% for the second quarter of 2023.
Net loss was $26.9 million in the three months ended June 30, 2023, compared to a net loss of $7.1 million in the prior year period, with the difference primarily driven by $15.7 million of non-cash write-down expenses related to inventory, investment and loans receivable in the second quarter of 2023.
Adjusted EBITDA (non-GAAP) increased to $1.5 million in the three months ended June 30, 2023, compared to $1.1 million in the prior year period. The increase was primarily driven by early progress with the Company’s strategic refinement and optimization initiatives.
On June 30, 2023, the Company had $4.1 million in cash, cash equivalents, and restricted cash compared to $3.5 million on December 31, 2022. Notes payable net of discount on June 30, 2023, was $57.0 million compared to $59.7 million on December 31, 2022.

TLLTF Stock Performance

TLLTF stock is trading at $0.0575 on September 7 ^th , up 94.26% in the past month. The stock has a 52-week price range of $0.017-$0.16 and is up 42.68% year to date.

As the cannabis industry sees tremendous growth in the coming years, savvy investors should keep an eye on top ancillary cannabis stocks that can offer exposure without the risks of direct plant-touching. Companies providing essential picks and shovels to the cannabis gold rush can generate attractive returns.

When evaluating these stocks, utilize risk management by diversifying across several companies and industries. Look for strong financial fundamentals and technical signals like established support levels and upward trends. Use volume and momentum indicators to identify ideal entry and exit points. Set stop losses and take profits when targets are hit. While ancillary cannabis stocks don’t come without risks in a volatile sector, proper analysis and discipline can help optimize opportunities.

With the right mix of due diligence and risk mitigation, ancillary cannabis stocks can cultivate impressive gains for investors in the flourishing green rush. By focusing on the picks and shovels instead of the plants, investors can position their portfolio to profit from the cannabis boom ahead.

Company Name:	TILT Holdings Inc
Stock Symbol:	TLLTF
Market:	OTC
Website:	tiltholdings.com

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