Over the past three years, marijuana stocks have looked practically unstoppable. But since the beginning of May, they’ve proven quite fallible, with close to three dozen pot stocks declining by a double-digit percentage last month.
At the heart of investors’ concerns are supply chain problems throughout North America. In Canada, a backlog of cultivation applications, coupled with a shortage of compliant packaging solutions, has kept growers from planting, harvesting, processing, or selling cannabis. Since the green flag waved in October on recreational weed sales, cannabis store revenue has mostly flatlined.
Meanwhile, in the United States, pot sales in key markets like California have been disappointing. A combination of high tax rates (which have coerced illicit production) and marijuana oversupply have produced tax revenue that’s well below initial estimates.
Add these problems up, and it’s no surprise to learn that Wall Street has been reducing 2020 earnings-per-share (EPS) estimates throughout the industry.
But there are always exceptions to the rule — and in June, it’s the following five small-cap pot stocks that have seen their profit projections rise, according to Wall Street…
Vertically integrated U.S. dispensary operator Trulieve Cannabis (NASDAQOTH:TCNNF)shouldn’t be a big surprise on this list following the company’s robust growth outlook offered in its first-quarter operating results press release. After generating just shy of $103 million in 2018 sales, the Florida-focused seed-to-sale operator has called for $220 million to $240 million in 2019 sales, and between $380 million to $400 million in 2020 revenue. As such, Wall Street’s consensus of $0.74 per share in profit for 2020 is now $0.86 per share.
The secret to Trulieve’s success has been staying close to the vest, so to speak. Headquartered in Florida, Trulieve has opened 28 of its 30 dispensaries in the Sunshine State. By focusing on a single, albeit lucrative, market, the company has been able to successfully build its brand and grab valuable market share — and do so all while keeping its costs down.
Another small-cap marijuana stock with increasing EPS estimates for 2020 is specialty grower Flowr Corp. (NASDAQOTH:FLWPF). Flowr, which has been approved by the Securities and Exchange Commission to uplist to the Nasdaq from the over-the-counter exchange, had been expected to deliver 15 Canadian cents (CA$0.15) in full-year profits in 2020 three months ago. That’s now been upped to an expectation of CA$0.20 per share.
What makes Flowr so special is the company’s focus on genetics and production efficiency. Whereas most Canadian growers are fighting over which company can produce the most discount or average-quality cannabis, Flowr is specifically focusing on ultra-premium-quality weed. High-end flower has very little competition, minimal supply pressures, and plenty of pricing power. To boot, the 300 grams per square foot of production that Flowr estimates could be up to three times higher than the industry average…
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