Cannabis investors had high hopes for the Canadian recreational marijuana market back in 2018, but revenue growth has disappointed up to this point as many legal Canadian cannabis producers continue to…
burn cash. In the U.S., cannabis investors were optimistic about the outlook for federal legalization when President Joe Biden won the November 2020 election and Democrats gained control of both houses of Congress. Unfortunately, Democrats have made limited progress on cannabis reform, and U.S. multistate operator, or MSO, stocks have struggled. Here are eight under-the-radar U.S. cannabis stocks that financial services firm Cantor Fitzgerald analyst Pablo Zuanic is watching in 2021.
Cresco Labs Inc. (ticker: CRLBF)
Cresco labs is a Chicago-based MSO that operates in nine U.S. states. Zuanic is optimistic that Cresco can exceed analyst estimates in the next couple of quarters as it continues to expand its business and consolidate recently acquired assets. He says Cresco’s Illinois and Pennsylvania wholesale franchises provide value for investors. Unfortunately, the company lacks scale in the key Florida market and it is dealing with stiff market share competition in Massachusetts and Illinois. Zuanic says he is also still skeptical about Cresco’s business model in California. Cantor Fitzgerald has an “overweight” rating and a $13.50 price target for CRLBF stock.
Curaleaf Holdings Inc. (CURLF)
Curaleaf is headquartered in Massachusetts and operates in 23 different states. The company is also one of Zuanic’s top MSO stock picks. In the second quarter, Curaleaf reported 18% quarter-over-quarter organic sales growth, which Zuanic says likely outpaced the underlying growth in Curaleaf’s markets. Curaleaf’s margins also expanded. However, Zuanic says the company’s $73 million operating cash flow loss in the quarter was likely the worst in its history, thanks to inventory buildup in key states ahead of recreational cannabis launches and an overall uptick in expenses. Cantor Fitzgerald has an “overweight” rating and a $24 price target for CURLF stock.
Green Thumb Industries Inc. (GTBIF)
Green Thumb Industries operates brick-and-mortar dispensaries and wholesale businesses. It is also another of Zuanic’s top MSO stock picks. In the second quarter, Green Thumb reported 14% sequential revenue growth — double the 7% growth expected by analysts. Zuanic says new capacity in Illinois drove the second-quarter revenue beat, and additional capacity in New Jersey, Ohio and Pennsylvania should boost revenues by mid-2022. He says the introduction of flower in the New York and Virginia medical marijuana programs could be a bullish near-term catalyst. Cantor Fitzgerald has an “overweight” rating and a $46 price target for GTBIF stock.
Trulieve Cannabis Corp. (TCNNF)
Trulieve has the largest cannabis market share in Florida and is another of Zuanic’s top MSO stock picks. Zuanic says analysts don’t fully appreciate the “slew of growth drivers” ahead for Trulieve in the next year, including expansion of its Pennsylvania and Massachusetts businesses, the integration of Harvest Health & Recreation Inc. (HRVSF) assets and the potential for a…
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