The marijuana industry had itself quite the year in 2018. Although pot stocks were somewhat of a mixed bag, with many delivering huge declines, the cannabis industry gained validity like never before.
In October, Canada became the first industrialized country in the world to give the green light to recreational pot. The following month, a handful of U.S. states legalized or expanded the use of cannabis. And to end the year, President Trump signed the farm bill into law, legalizing hemp and hemp-based cannabidiol products in the United States. No longer considered taboo, the legal marijuana industry is ripe for investment…
Wall Street expects these pot stocks to decline
The excitement surrounding the rise of legal cannabis is readily apparent on Wall Street. A screen of more than three dozen pot stocks found that analysts expect nearly every one of them to head higher. And by “head higher,” I mean Wall Street’s consensus price target for these marijuana stocks is higher than where these companies are currently valued on a per-share basis. But note: I said nearly every one.
Among the sea of green are two pot stocks that have lower consensus price targets than their current prices. Let’s take a look to see if Wall Street is right about these companies, or if investment firms are missing the big picture.
Innovative Industrial Properties
You might be surprised to learn that cannabis real estate investment trust (REIT) Innovative Industrial Properties (NYSE:IIPR) is one of the two companies Wall Street believes will head lower. Right now, its share price is 2% higher than analysts’ consensus price target.
What makes this so shocking is that Innovative Industrial Properties is one of a very small handful of pot stocks that’s profitable on an operating basis. This has to do with the consistency and predictability of the cannabis REIT model. Innovative Industrial currently owns 11 medical-marijuana-growing and/or -processing properties in eight states. These properties are then leased for a period of between 15 and 20 years, with annual rental increases and a 1.5% management fee built into the contracts. In essence, it allows Innovative Industrial to stay ahead of the inflationary curve and deliver steady cash flow. In fact, this is a company that’s already increased its…
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