As the healthcare industry struggles to reach the finish line to find a cure for the coronavirus and end the global misery it is causing, cannabis is bringing relief to people facing this crisis. This has brought the cannabis industry back into the spotlight, not only highlighting the medical benefits of marijuana, but also giving an idea of the potential of this industry.
The sudden increase in marijuana sales amid the pandemic has helped cannabis companies’ revenues soar. Of the Canadian pot stocks, in my opinion, Aphria (APHA) is in the best position, while Curafeuille Holdings ( CURVE -7.50% ) and Green Thumb Industries ( GTBIF -7.08% ) are currently the top American cannabis players.
While not every cannabis company has benefited, let me tell you why these three were not only able to survive the crisis, but grow and become big players once it all came back to normal. the normal.
Aphria has always been profitable
Compared to its Canadian peers Aurora CannabisHEXO, and canopy growth, which are still recording negative earnings, Aphria is safe. The company’s management believes in playing the game quietly – focusing on growing its business in its primary market, Canada, while consistently posting positive EBITDA (earnings before interest, taxes, depreciation and amortization ) over the last three quarters. It posted a positive adjusted EBITDA of C$5.7 million in its recent third quarter.
The importance of a strong C-suite leadership team is evident in Aphria’s success. The company’s CEO, Irwin Simon, has changed the face of the company, which in 2018 dealt with numerous allegations from short sellers. The focus on core business – without burning money on acquisitions – has worked well for Aphria. It ended the quarter with C$515.1 million in cash and cash equivalents, as well as an additional C$100 million in equity, as HEXO and Aurora need to dilute their shares to raise funds.
Aphria didn’t even have to choose to cut costs with layoffs amid the COVID-19 crisis, while Canopy Growth and Aurora Cannabis had to to survive.
Whether Aphria continues to outperform in this race for profitability will be clear in its July 29 fourth quarter results.
Curaleaf and Green Thumb: exceptional ability to grow in times of crisis
Curaleaf’s growth so far has been remarkable. It has consistently increased revenue and achieved positive EBITDA for the past four consecutive quarters.
Despite the current crisis, it continued to sequentially increase revenue by 28% and adjusted EBITDA by 45% in the first quarter of 2020. First quarter revenue posted triple-digit growth of 174% to $96.5 million , while adjusted EBITDA came in at around $20 million.
Its Select brand portfolio, a cannabis oil brand it acquired in February, is now popular in nine US states: Colorado, Oregon, Nevada, Michigan, California, Maryland, Oklahoma, Arizona and Connecticut, the latter having entered in June. The company will add Maine, Massachusetts, Ohio and Florida to the list by August.
Currently, Curaleaf has its brand in 18 states with 57 dispensaries, 15 cultivation sites and 24 processing sites. Its Grassroots acquisition will allow it to conquer even more markets. As of March 31, Curaleaf had $176.4 million in cash, giving investors confidence in its ability to weather the crisis and grow. We’ll learn more about its growth initiatives for 2020 in its second-quarter results, which are due August 17.
Green Thumb’s presence in 48 stores in 12 US markets, while holding licenses for 96 outlets, is what makes it an attractive choice. Its rapid expansion continues despite the pandemic. She opened several stores in Illinois, Pennsylvania and Nevada over the past two months, and has licenses to open six additional stores in Nevada. Rising cannabis sales in new legal market in its home state of Illinois boost company revenue; in its recent first quarter, it posted phenomenal revenue growth of 268% year-over-year to $102.6 million, with positive EBITDA of $25.5 million. Cannabis demand is still strong in the United States, including in Illinois, which saw record sales in June. We can expect to see strong revenue and another positive EBITDA quarter in Green Thumb’s second quarter results, which will be released on August 12.
The Ithe Illinois market still has a lot of room for improvement. Additionally, more states are on the verge of legalizing marijuana in 2020, and new “cannabis 2.0” products (edibles, vapes, drinks, concentrates, etc.) are giving these two pot companies more opportunities to combine with their strong cash on hand. So far in July, shares of Aphria, Curaleaf and Green Thumb have gained 19.9%, 20.1% and 19.7% respectively. Comparatively, the market as tracked by the SPDR S&P 500 ETF is up 4.6% over the same period.
Worth the risk?
Cowen and company analyst Vivien Azer estimates that the US marijuana industry will grow to generate nearly $85 billion in sales by 2030. Cowen’s research shows that the headwinds currently facing the cannabis industry could become a positive catalyst at a later stage . Curaleaf and Green Thumb, which are currently in a strong financial position, will have an added advantage when the pandemic recedes. The launch of more cannabis-derived products in 2020, with huge demand in Canada and the United States, will generate more revenue.
the marijuana industry is for investors who are willing to take risks and have the patience to let this industry show its true potential. I think these three pot stocks are worth that risk.
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.