Fortunately, with many marijuana stocks on the market, investors are the choice if they want to buy into the sector. Two companies are currently striking.
In this segment of Motley Fool Live recorded on February 5, 2021, lfor the first time Motley Fool contributor Eric Volkman and Corinne Cardina, head of the health care and cannabis bureau, do not matter with this high potential pair.
Corinne Cardina: Pure plays, these are companies whose whole business model is cannabis, they are dependent on cannabis, if you will, they have no backup plan. What is the first one we are going to talk about?
Eric Volkman: What do we have here on our page? Let me look at the cheat sheet. Where are we going? The first one we look at is Cresco Labs (OTC: CRLBF).
Cresco Labs is based in Illinois, which we talked about just a second ago, which is relatively speaking now a wide open marijuana market. The stock is higher, it is not an undiscovered stock. Over the past year, it has risen by 152%, which is a lot.
But there is momentum behind them. The sales growth of the last quarter was almost 330%, which tells you something, many of which are organic. It is not profitable. What a surprise, right? This never happens with marijuana stocks. But they are beautifully positioned.
They have a good grip on the Illinois market, more pharmacies are coming, they are also active outside their market. Their pharmacies are popular, they are clean, they are nice places to buy marijuana. I see more growth in their future. I like that company a lot. I think this is probably my favorite among the retail stocks, Cresco.
They do not have a large footprint nationally, but they are getting there, and they are based in certain places that, if I wanted to put money on, would become legal sooner rather than later. I think especially of New York. They have – I think – three pharmacies there. Three or four pharmacies.
At the moment, of course, they can only sell medical marijuana there. But a pharmacy is a pharmacy, whether they sell medical or recreational. Once the switch is turned on for relaxation, Cresco is right there in the market. Once they have established themselves and know all the quirks and the legal ins and outs, it is not that complicated for them to scale up.
I’m a Cresco fan. I’ve been around for a while, and I’m still strong about the company.
Cardinal: Great, yes. Governor Cuomo said he promised to open the adult recreation market for New York. This is likely to happen sooner rather than later. What is your second pure play on which you are clumsy?
Volkman: Nr. 2 is another potential recreational game in Illinois. They are also heavy in retail, and it is Green Thumb Industries (OTC: GTBIF).
The stock has risen even further, but it is still not that expensive, believe it or not. It has risen by almost 270% in the past year.
But just like Cresco, and for some of the same reasons, they also had a three-digit revenue growth [in] the most recent quarter. On an annual basis, they have more than doubled, 131%. At an EBITDA level, it is profitable. It depends on how much confidence you have in EBITDA, OK, that’s a little shaky. But just the fact that they have a good and positive territory, according to a degree of profitability, it is remarkable and it is encouraging. They come there.
As for the net result, it is not too far in the red. On a stock-share [in] their last quarter, their loss was only $ 0.11 per share. It’s manageable, it’s not all that their cash is sucked away and that they are not going to do business anymore. So they are doing well.
Again, let’s not forget, there is room for many companies in Illinois. There is room for more than one major operator. I think, I see Green Thumb may not have as much potential as Cresco, but I like their prospects. I think they have a nice future ahead of them.
Again, retail nationwide, certain states are almost 100%; they will legalize recreational marijuana. And Green Thumb is one of the different companies, I think, well placed to benefit from it.