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Cannin Commentary

3 Cannabis Stocks That Can Gain Over 50% According to Analyst Estimates

By Cannabis Industry Journal Staff
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Welcome to the Cannin Commentary Column. We’re happy to announce our partnership with Cannin Investment Group, a cannabis investment analysis firm. In this new column, we will provide readers with a taste of Cannin’s insights and analysis that they offer to their members. Throughout the new installments of this column, you’ll find articles that will touch on investment tips, trends, predictions, market updates and more.


Companies in the cannabis sector have the potential to increase your wealth at an enviable rate over the upcoming decade. But what are the 3 cannabis stocks that can gain over 50% according to analyst estimates?

The wave of cannabis legalization sweeping through the U.S. right now as well as the prospect of decriminalizing or even legalizing adult-use will be key drivers for licensed producers.

Here, we take a look at three cannabis stocks in Columbia Care, Green Thumb Industries and Cresco Labs that should be on your buying radar right now. Each of these stocks is also trading at a deep discount according to Wall Street estimates, allowing investors to derive market-beating gains in the next year.

Columbia Care

U.S.-based multi-state operator, Columbia Care (OTC: CCHWF) is valued at a market cap of $1.12 billion. The company has already increased revenue from $77.4 million in 2019 to $179 million last year.

Now, Wall Street expects sales to more than triple year over year to $625 million in 2021 and surpass $970 million next year. These stellar growth rates in revenue should allow Columbia Care to improve its bottom-line from a loss per share of $0.48 in 2020 to earnings per share of $0.3.

Columbia Care has a presence in 18 jurisdictions across the U.S. and Europe where it operates 31 cultivation and manufacturing facilities.

The company generated $110 million in revenue in Q2 which was 232% higher than the prior-year period. Columbia Care has 73 active dispensaries and another 26 under development, enabling it to target a rapidly expanding addressable market that is forecast to touch $31.6 billion by 2026.

So, is Columbia Care a cannabis stock that can gain over 50%? Well, analysts tracking Columbia Care stock have a 12-month average price target of $9.38 for the stock which is more than 200% higher than its current trading price.

Green Thumb Industries

A cannabis giant trading 46% below its all-time high, Green Thumb Industries (OTC: GTBIF) is valued at a market cap of $4.4 billion. Headquartered in Illinois, Green Thumb Industries has 13 manufacturing facilities, licenses for 111 retail locations and currently operates in 14 domestic markets.

In the second quarter of 2021, the company’s revenue rose by 85% year over year to $222 million – driven by strong demand in Pennsylvania and Illinois. The Q2 of 2021 was also the fourth consecutive quarter where Green Thumb reported a profit, with a net income of $22 million compared to a loss of $13 million in the prior-year period.

Green Thumb currently has 65 retail stores and just opened a third store in the state of New Jersey which is a market that recently legalized cannabis for adult use. While retail sales in New Jersey are expected to begin next year, Green Thumb’s presence in the medical space will enable the company to gain traction in the highly competitive adult-use cannabis vertical as well.

So, is Green Thumb Industries a cannabis stock that can gain over 50%? Well, analysts expect Green Thumb stock to rise by 95% in the next 12-months given its average price target of $37.54.

Cresco Labs

The final stock on our list is Cresco Labs (OTC: CRLBF), another cannabis heavyweight valued at a market cap of $2.16 billion. A vertically integrated cannabis operator, Cresco Labs currently has 40 dispensaries in 10 states and has grown its sales from $43 million in 2018 to $476 million in 2020.

Most states have a limit on the licenses they are allowed to issue and this barrier to entry allows Cresco and peers to enjoy a competitive advantage in the markets they operate in. Cresco Labs reported revenue of $210 million in Q2, a rise of 123% year over year.

It reported a net profit of $2.7 million in Q2 compared to a loss of $41 million in the prior-year quarter. Cresco expects to generate $1 billion in sales by the end of 2021, making it among the first cannabis companies to reach the milestone.

We believe Cresco is certainly a cannabis stock that can gain 50%. Wall Street expects Cresco Labs stock to gain over 60% compared to its current trading price.

The Evolution of Cannabis Entrepreneurship

By Jonathan Monk
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Cannabis presents a plethora of challenges for entrepreneurs not seen in more traditional industries. Akin to the dot-com boom of the early 2000s, the cannabis industry has seen an astonishing flurry of business over the past decade. Within this dynamic landscape, new cannabis companies come and go on a near-daily basis.

To capitalize on novel markets’ potential, hopeful entrepreneurs from all walks of life have “jumped headfirst” into the cannabis space. This new breed of entrepreneurs must not only be smart, but they must also be challenging. Yet, as the cannabis industry evolves under the forces of legalization and innovation, our understanding of what defines cannabis entrepreneurs continues to change.

Cannabis businesses are shaped by the regulations, challenges and opportunities of specific market niches. As such, cannabis entrepreneurs have evolved with the environments in which they do business.

California & Proposition 215   

California paved the way for the industry of today by legalizing medical cannabis in 1995. Since the passage of historic Proposition 215, cannabis has continued to gain momentum across the globe. This progress has happened through the visions and hard work of small business owners.

The early days of legal cannabis in California are now criticized for their lack of regulation. During the late 1990s and early 2000s, all you needed to start a cultivation business in California was a place to grow a garden. While early dispensaries did need local business licenses, they could legally purchase and sell untested products from unlicensed growers.

The genealogy of the modern cannabis industry can be traced directly back to the days of California’s Prop 215. During this era, the first cannabis dispensaries were founded – this model has since been replicated thousands of times. Also, the Prop 215 model gave rise to America’s first legal, commercial cannabis farms.

Cannabis entrepreneurs in California’s medical space focused primarily on developing the blueprints for a brand-new industry. To this end, they did not have the time or luxury to finetune the businesses for such things as operational efficiency and brand awareness. Even more, these people did not have to deal with such complexities as employee screening, product testing and seed-to-sale tracking.

Medical Cannabis Entrepreneurs

New medical markets stand in stark contrast to those seen in the early days of California. To this end, today’s medical markets operate within a web of stringent government regulations. For entrepreneurs, these rules set forth major emphases on both compliance and technology.

The Pennsylvania medical cannabis industry provides an excellent platform for understanding how the regulatory system of a market shapes entrepreneurial paths. For instance, medical cannabis cards are only issued to patients that meet the minimum criteria of 23 qualifying conditions, including severe conditions like aids, cancer and epilepsy. Beyond that, cannabis dispensaries in Pennsylvania must meet a slew of challenging criteria to operate and pay large sums of money in licensing fees.

To handle the regulatory requirements in places like Pennsylvania and remain profitable, medical cannabis entrepreneurs are incredibly dependent on technology. To this end, dispensaries utilize point-of-sale (POS) and seed-to-sale software to track inventory and stay compliant carefully. Even more, they use state-of-the-art security systems to safeguard their operations.

Cannabis entrepreneurs in medical markets must be able to run compliant operations and support their businesses with requisite technology. These elements stand in stark contradiction to the “wild west” mentality that pervaded the early industry. As such, it’s safe to assume that the rules of today’s markets force entrepreneurs to be more professional than in the days of CA Prop 215.

Adult-Use Cannabis Entrepreneurs

The most considerable difference between medical and adult-use cannabis companies has to do with their available customer base. Importantly, adult-use cannabis companies are only bound by minimum age requirements and state borders. Furthermore, limited restrictions on licensing create highly competitive markets that require sophisticated sales and marketing operations.

As there are no limits on potential customers, and limited regulations on license counts, business opportunities in adult-use markets are primarily directed by supply and demand rules. Because competition is the driving force in adult-use markets, entrepreneurs in this vertical have a good deal in common with peers outside the cannabis industry.

Perhaps the most defining characteristic of adult-use entrepreneurs is an emphasis on branding and marketing. As adult-use markets mature in places like Colorado, a phenomenon known as “brand concentration” occurs when a few companies come to dominate a majority of the market. As smaller companies fight for market share, they must develop professional brands that appeal to a broad customer base.

Cannabis entrepreneurs in adult-use markets must master the skills required in medical cannabis while also expanding their knowledge base in modern business dealings. Of these, the development of professional brands is one of the most defining characteristics of adult-use entrepreneurs.

It’s astonishing to see how much the cannabis industry has grown and matured looking back just a few short years. As business opportunities come about with new legalization efforts, entrepreneurs quickly rise to take advantage of untapped markets. As the cannabis business continues to evolve with the times, entrepreneurs must pivot to stay compliant, relevant and successful.

While the early Prop 215 market in California barely resembles today’s industry, it’s important to remember where we came from. Namely, our understanding of the contemporary cannabis business results from everyone who came before us. As the industry progresses, we will continue to complement established best practices with the requisite innovations that come with new opportunities.

UKflag

How Much Cannabis Astroturfing Is Afoot In The UK?

By Marguerite Arnold
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UKflag

Astroturfing is the practice, in political messaging and campaigns, of creating what seems to be a legitimate, grassroots inspired campaign that is actually bought and paid for by an industry lobby or other corporate interests.

It is also clear that this practice is now entering the cannabis space, certainly in the UK.

How and Where?

On August 1, the British Conservative Drug Policy Reform Group sent out a group email entitled “Strategic litigation on medical cannabis access in the UK.” The email, from the group’s senior communications manager, was to announce the kick-off of a crowdfunding campaign to defend a cannabis patient.

It’s beneficiary? A British female MS patient, Lezley Gibson, now facing prosecution for growing her own cannabis after being unable to afford what was on offer at her local pharmacy.

Here is the first flag: MS is the only condition for which Sativex (manufactured by British firm GW Pharma) is prescribed on label (in other words without special approvals).

The problem is that the NHS (along with most of the German statutory approvers) feels that Sativex is still too expensive and not effective enough. And that problem won’t be solved with either patient home grow access or a lawsuit to gain that right, but rather funded trials.

UKflagHowever, more disturbingly, the email referenced the supposed success of a similar legal tactic in Germany several years ago. This is to say it used a highly inaccurate analogy. In Germany, a male chronic pain patient sued the government for the right to grow his own cannabis. He won the right temporarily, but this was taken away from him after the law changed in March 2017. Now he, like every other cannabis patient in Germany, must get his cannabis from a pharmacy. German patients also must get their initial prescription approved by health insurers – which is for everyone – but particularly non MS patients – the biggest fight in the room right now on the topic of medical efficacy.

Further, the right to grow one’s own medical cannabis, no matter the condition suffered, has been removed from patients in every legal jurisdiction where there is no constitutional right to it first – namely patients sue for the same.

As such, it is entirely conceivable that as a “strategic” case, this is more likely to put pressure on the NHS to pay the sky-high price of Sativex for MS patients (which it has already refused to do) than create any other kind of access for anyone else.

When contacted by Cannabis Industry Journal, a CDPRG spokesperson said that the patient had given her support for the crowdfunding campaign and needed help.

piechart
Most German Patients Are Still Only Getting Dronabinol

However, there are other issues here. Namely that when selecting a strategic case (no matter how harsh this sounds to the individual patient), the entire discussion at this point – certainly from an efficacy point of view, might be better served with supporting the case of a patient who has less access because of either physical condition or economic status.

In fact, in Germany so far, thanks to the change in the law that the British group references, while there certainly are tens of thousands of cannabis patients at the moment (including many MS patients), the majority of them receive Dronabinol or Sativex. And all of them have to fight for medical access and approval from their insurers. That is of course, when they can find a doctor to prescribe in the first place. There are also estimates that there are close to a million patients in Germany who cannot get access, thanks to the change in the law created by one patient’s law suit.

Is this flavour of litigatious advocacy now afoot in the UK, in other words, the kind of lawsuit that is designed to benefit the industry more than patients looking for affordable, home-grown, if regulated product?

Astroturfing Cannabis Issues Under Brexit Colors?

No matter the real versus stated intent of the instigators of the Gibson case, or the eventual outcome of such litigation, there is no doubt that cannabis is being brought into larger political debates. And further, no surprise, “patient access” is an issue just as ripe for “issue manipulation” and astroturfing as anything else.

“Strategic” if not “crowdfunded” cause or tactical lawsuits are another form of this technique.

That foreign cannabis money is already in the room is also no surprise. The British press was alight with stories during June of the amount of money contributed to the CDPR Group from Canadian sources.

Seen within the context of Brexit itself, this is disturbing locally.There are other issues involved in this kind of challenge to the law.

Not to mention the fact that in May, none other than Arron Banks, the self-styled backer of the Leave Campaign, decided, suddenly, to throw his hat into the CBD oil ring on Twitter. Not to mention repeated the same information repeatedly, including his $4 million investment into the space during the following months so far. Plus, of course, wildly optimistic valuations of the U.S. market.

Suing For Patient Justice Or A Backdoor For Canadian and Other Corporate Interests?

There are other issues involved in this kind of challenge to the law.

The first is that in the British case this is actually not a constitutional case per se, but a human rights one. See the problems that those who are trying to define the British constitution right now on other matters (see Brexit) are running into.

The second is that while the patient in question in this case (Ms. Gibson) is undoubtedly relieved at the prospect of a legal defence for growing her own medication in the face of insurmountable cost, on the “positive” side, her case is unlikely to do much more than make impoverished patients fight NHS paperwork if they can find a doctor. See Germany, as a prime example.This lawsuit, in other words, no matter how it might get one woman out of a terrible legal situation, is not necessarily “pro-patient.”

But what it will do is something else. It may well remove the current widespread prohibition on the harvesting of cannabis flower in the UK. And while patients would face again being moved into the slow lane of NHS approvals (with lots of fights over efficacy looming and still unsolved), corporate growers and processors if not importers, already investing millions into such efforts across the UK and Ireland, benefit.

At the exclusion, also, as has been the case in Germany, of local producers who are not already large corporate interests or existing farms.

This lawsuit, in other words, no matter how it might get one woman out of a terrible legal situation, is not necessarily “pro-patient.” It also may well do everything to frustrate, slow down and further complicate medical access for those at the end of the chain, while only opening up “investment opportunities” for large companies and well-heeled interests who have nothing but profit, if not the destruction of the NHS in mind.