The analyst community has finally started to warm back up to the pot stock space in recent action. This shift can be seen in numerous price target adjustments and perhaps most notably in the signature upgrade out to start this week from Stifel analyst W. Andrew Carter, who raised Aphria Inc (NASDAQ:APHA) from a Hold to a Buy and said the stock could launch up to $5.90 per share.
It was a valuation upgrade, but it sent a wave of energy through the cannabis space because it suggests increasing attention being paid to the space again by major firms.
That said, the upgrade may form a template for other coming analyst activity in the space, and indeed for how investors act toward cannabis stocks over the foreseeable term, which is to compare and contrast within the space, seeking out the best performing companies.
In other words, a stock-picker’s market in cannabis.
This follows gross inefficiency and poor planning as a chronic feature for many prior leaders. Companies like Aurora (ACB) and Canopy (CGC) burned through a Solomon’s Mine of cash in the past year. In the meantime, APHA is still sitting on a mountain of nearly $400 million in reserves.
But the point here isn’t just about Aphria versus other cannabis producers. It’s about execution in the broad cannabis space. There are a number of tailwinds in play right now in the space. But companies vary widely within that context. Some have strong performance to boast about. Others don’t. Capital will likely flow accordingly.
With that in mind, we take a look here at a handful of companies that have executed at the top of the space on different dimensions and in their own respective niches, including: Aphria Inc (NASDAQ:APHA), Curaleaf Holdings Inc (OTCMKTS:CURLF), GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH), Sugarmade Inc (OTCMKTS:SGMD), and Green Thumb Industries Inc (OTCMKTS:GTBIF).
Aphria Inc (NASDAQ:APHA), as noted above, just received a notable upgrade from Stifel analyst W. Andrew Carter, who upgraded the stock from a Hold to a Buy and said he was looking for shares to push up to $5.90 per share.
The upgrade came as the result of a valuation argument that suggests the company is trading at a discount to peers it is clearly out-executing. According to a Barron’s article out on Monday, the stocks of rivals like Canopy Growth (CGC), Aurora Cannabis (ACB) and Tilray (TLRY) go for an average of 5.4x forward 2021 sales, whereas APHA trades for just 4.4x forward sales. Carter sees Aphria shares building a premium and hunting a 6x forward sales multiple in the future.
Aphria Inc (NASDAQ:APHA) is a leading global cannabis company driven by “an unrelenting commitment to our people, product quality and innovation.”
Headquartered in Leamington, Ontario – the greenhouse capital of Canada – Aphria has been setting the standard for the low-cost production of safe, clean and pure pharmaceutical-grade cannabis at scale, grown in the most natural conditions possible. Focusing on untapped opportunities and backed by the latest technologies, Aphria is committed to bringing breakthrough innovation to the global cannabis market.
The company touts itself as one of Canada’s lowest cost producers, produces, supplies and sells medical cannabis.
The stock has been acting well over recent days, up something like 7% in that time. Shares of the stock have powered higher over the past month, rallying roughly 8% in that time on strong overall action.
Aphria Inc (NASDAQ:APHA) managed to rope in revenues totaling $143.9M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 95.5%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($515.1M against $178.1M).
Curaleaf Holdings Inc (OTCMKTS:CURLF) is another top performance story in terms of building a fundamental advantage relative to peers in the cannabis space. Among publicly traded U.S. multi-state operators, Curaleaf is the biggest in terms of its distribution footprint, with more operational dispensaries than any other player.
However, perhaps more importantly, the company is out in front in terms of strategic growth as we approach its expected closing of the Grassroots acquisition, which follows the Cura Partners acquisition to bring the Select brand of products into its portfolio. Once Grassroots is completed, CURLF will be sitting just shy of 72 dispensaries, with licensing room to open up another 50-60 across the legal national landscape in the US.
Curaleaf Holdings Inc (OTCMKTS:CURLF) promulgates itself as a company that operates as an integrated medical and wellness cannabis operator in the United States. The Company is the parent of Curaleaf, Inc., a leading vertically integrated cannabis operator in the United States.
Curaleaf, Inc. operates 57 operational dispensaries to go along with 15 cultivation sites and 24 processing centers in 18 total states, with a focus on highly populated, limited license states, including Florida, Massachusetts, New Jersey and New York. Curaleaf, Inc. leverages its extensive research and development capabilities to distribute cannabis products in multiple formats with the highest standard for safety, effectiveness, consistent quality and customer care. Curaleaf is committed to being the industry’s leading resource in education and advancement through research and advocacy.
Curaleaf Inc.’s Florida operations were the first in the cannabis industry to receive the Safe Quality Food certification under the Global Food Safety Initiative, setting a new standard of excellence.
It cultivates, processes, markets, and/or dispenses a range of cannabis products in various operating markets, including flower, pre-rolls and flower pods, dry-herb vaporizer cartridges, concentrates for vaporizing, concentrates for dabbing, tinctures, lozenges, capsules, and edibles.
If you’re long this stock, then you’re liking how the stock has responded to the announcement. CURLF shares have been moving higher over the past week overall, pushing about 24% to the upside on above average trading volume.
Curaleaf Holdings Inc (OTCMKTS:CURLF) pulled in sales of $129.8M in its last reported quarterly financials, representing top line growth of 177%. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($251M against $177.1M).
GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) isn’t a pot stock, but it is a cannabis play in the market. The company is the global leader is total sales right now derived from the cannabis plant due to its industry leading treatments (based on non-THC cannabinoids) for a range of ailments, including epilepsy, Dravet syndrome, and Lennox-Gastaut syndrome.
The main drug it sells is epidiolex, which the company is pushing for label expansion beyond these limited conditions. Even so, it is doing north of $120 million per quarter right now in sales.
GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) bills itself as a biopharmaceutical company that engages, as noted above, in discovering, developing, and commercializing cannabinoid prescription medicines using botanical extracts derived from the Cannabis plant.
The company operates through three segments: Commercial, Sativex Research and Development, and Pipeline Research and Development. Its lead product is Epidiolex, an oral medicine which is in Phase III clinical development for the treatment of refractory childhood epilepsies, as well as for the treatment of Dravet syndrome, Lennox-Gastaut syndrome, tuberous sclerosis complex, and infantile spasms.
The company also develops and markets Sativex, an oromucosal spray for the treatment of spasticity due to multiple sclerosis. In addition, it develops various product candidates, which are in Phase I and II clinical development for the treatment of glioma, neonatal hypoxic-ischemic encephalopathy, adult epilepsy, and schizophrenia.
If you’re long this stock, then you’re liking how the stock has responded to the announcement. GWPH shares have been moving higher over the past week overall, pushing about 4% to the upside on above average trading volume. Shares of the stock have powered higher over the past month, rallying roughly 9% in that time on strong overall action.
GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) generated sales of $120.7M, according to information released in the company’s most recent quarterly financial report. That adds up to a sequential quarter-over-quarter growth rate of 9.2% on the top line. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($500.9M against $103.5M).
Sugarmade Inc (OTCMKTS:SGMD) is the smaller, more speculative, but faster growing name in this group. SGMD is quietly becoming one of the most interesting names in the cannabis space based on its controlling interest in BudCars, a leading California cannabis delivery company that operates on a traditional retail model with consistent 45-50% gross margins on cannabis inventory.
Since Sugarmade took over control of operations, the outfit has posted an almost astonishing pace of 10% week-over-week sales growth. This has further reared up in the company’s most recent release, featuring guidance for its calendar Q3 performance, where it is now looking for consistent 30% topline sequential monthly growth from BudCars in July and August, and an annualized pace of revenues exceeding $11 million by the end of September. This is a sharp upward revision of its pace of growth since putting out guidance in March.
This follows breakout record months in May and June, where it posted new company performance records in basically every major metric as the BudCars model appears to be taking off.
Sugarmade Inc (OTCMKTS:SGMD) operates as a product and branding marketing company investing in operations and technologies with disruptive potential. The company’s portfolio includes CarryOutsupplies.com, SugarRush, and Budcars.com.
With the guidance, Jimmy Chan, CEO of Sugarmade, noted, “We believe we have enough visibility and enough data in hand to forecast that we will continue to see extremely robust growth in July and August. Many of the trends we saw come together in June to drive our performance remain in place and suggest new records across many metrics are likely this month as well.”
The upside story here is also fueled by the company’s upcoming launch of its new LA BudCars hub, which is set to open in coming weeks. The Los Angeles cannabis market is arguably the biggest municipal legal cannabis market in the world, and the company has noted that it conservatively estimates that its first LA hub will add at least $20 million in annualized sales, with a similar anticipated gross margin profile.
Sugarmade Inc (OTCMKTS:SGMD) pulled in sales of $416K in its last reported quarterly financials, representing top line growth of -27.3%. However, the company appears to be experiencing a strong growth acceleration due to its BudCars takeover, with revenues on pace for as much as $30 million in annualized sales this year, suggesting a rerating of shares from market participants could potentially be overdue.
Green Thumb Industries Inc (OTCMKTS:GTBIF) is similar in some ways to CURLF, as a dominant and rapidly growing multi-state operator establishing a controlling market position through operating dispensaries. On that note, the company just announced it opened Essence South Durango on June 27. According to the company’s most recent release, this is Green Thumb’s fifth Essence store in the Las Vegas area and 48th retail location in the nation.
“We are thrilled to open our fifth Essence location in Nevada and the second Essence store in Las Vegas this year following Essence South Rainbow’s opening in May,” said Green Thumb Founder and Chief Executive Officer Ben Kovler. “We are incredibly proud of our team’s continued resilience and execution throughout the COVID-19 crisis. The team is also honored to support the important work of an organization we passionately believe in, the Last Prisoners Project, which redresses the past and continuing harms of unjust laws and policies so that victimless cannabis prisoners can walk free.”
Green Thumb Industries Inc (OTCMKTS:GTBIF) bills itself as a company that manufactures and sells various cannabis products in the United States. The company’s cannabis products include flower, concentrates for dabbing and vaporizing, edibles, and topicals.
The company markets its products through third-party retailers. It also owns and operates a chain of 50 retail stores under the RISE dispensaries name. The company was actually also named a Best Workplace 2018 by Crain’s Chicago Business.
The context for this announcement is a bit of a bid, with shares acting well over the past five days, up about 13% in that timeframe. Shares of the stock have powered higher over the past month, rallying roughly 23% in that time on strong overall action. Green Thumb Industries Inc (OTCMKTS:GTBIF) pulled in sales of $138M in its last reported quarterly financials, representing top line growth of 271.9%. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($101.8M against $182.5M, respectively).
