The recent resurgence of the cannabis stock space has been a surprising development to many market participants. Sentiment on this group was already in the basement before the pandemic panic took hold of the markets and crashed the whole game. But pot stocks found support in mid-March as a group.
Since then, the MJ ETF is up nearly 50%, and a quick survey of leading names will show a series of aggressive bounces and a few breakouts of significant size and force.
We would cite several factors behind the move, including cyclical inflection, seasonal cannabis pricing effects, the pandemic lockdown cabin fever, and expanded market share for the survivors after many stocks in the space failed to survive the depths of the bear.
In short, these stocks were completely washed out after two years of bear market action, only to take another huge hit in March when the broad market was obliterated. But, just on the other side of that crash, they ran into an improving demand context, a shortage of supply, and reduced competition.
The result has been an impressive rebound that could well represent the dawning of a brand new cannabis bouncing baby bull market trend still in diapers and a bonnet. Thereās so much to look forward to: skepticism and short interest, unexpected growth, surprise M&A deals, new analyst attention, big IPOās, and eventually a supernova of hype, scandal, and nose-bleed valuations that leave latecomers with a bag to hold.
But thatās all down the road. Now, traders and investors have a chance to go shopping when these stocks are still unloved but just getting traction to the upside.
With that in mind, we present here a brief look at some of the smaller-cap names in the space that are sparking the most interest among traders in recent days: GrowGeneration Corp (NASDAQ:GRWG), Cannabis Strategic Ventures (OTCMKTS:NUGS), Cresco Labs Inc (OTCMKTS:CRLBF), and Medical Marijuana Inc (OTCMKTS:MJNA).
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GrowGeneration Corp (NASDAQ:GRWG) has been putting up strong numbers in recent updates from the company, and the stock has been reacting well, surging as much as 100% from its March lows in the past two months.
The company managed to rope in revenues totaling $33M in overall sales during the company's most recently reported quarterly financial data -- a figure that represents a rate of top line growth of 152%, as compared to year-ago data in comparable terms. If thereās any concerns here from a fundamental metric perspective, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($11.4M against $17.3M, respectively).
GrowGeneration Corp (OTCMKTS:GRWG) trumpets itself as a company that, through its subsidiaries, owns and operates retail hydroponic and organic gardening stores in the United States.
Currently, GrowGen has 27 stores, and carries and sells thousands of products, including organic nutrients and soils, advanced lighting technology and state of the art hydroponic equipment to be used indoors and outdoors by commercial and home growers.
According to company materials, āOur mission is to own and operate GrowGeneration branded stores in all the major states in the US and Canada. Management estimates that roughly 1,000 hydroponic stores are in operation in the US. By 2025 the market is estimated to reach over $30 billion with a compound annual growth.ā
If you're long this stock, then you're liking how it has responded in recent days as well. GRWG shares have pushed about 27% to the upside on above average trading volume in the past week since releasing Q1 financials.
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Cannabis Strategic Ventures (OTCMKTS:NUGS) is one of the fastest growing producers in the California cannabis market, with a record performance in April, where it saw an 800% sequential gain over calendar Q1 numbers to sell out of its inventory in early May.
But the company had anticipated this risk based on a steady acceleration in its new distribution partner agreements, and had already taken steps to more than double its production capacity, with that leap in production now starting to produce fresh cannabis for sale. That suggests coming sales data will continue to show monster second derivative growth throughout Q2.
Cannabis Strategic Ventures (OTCMKTS:NUGS) also recently announced that it is about to launch a full line of branded products which are already lined up to be featured through a partnership with one of the fastest growing cannabis delivery services in California.
The California cannabis marketplace is seeing a shortage right now, so producers have the best context possible ā unless they arenāt in a position to expand production. NUGS, luckily for its shareholders, has been able to scale up to capitalize on the context and drive what looks to be a pretty dramatic topline growth acceleration.
Overall, the companyās April data showed an annualized pace exceeding $10 million in sales.
āWe have never seen anything like this,ā noted Simon Yu, CEO of Cannabis Strategic Ventures. āWe booked $100,000 in one day to clear out all of our remaining inventory. We anticipated this dynamic but still underestimated the force of the trend. Too much demand is always the problem you want to have. And we are confident we will be able to translate this into further upside in terms of our top line growth curve.ā
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Cresco Labs Inc (OTCMKTS:CRLBF) is another name recently on the move after a strong catalyst. In this case, the company announced the completion of its expansion project for cultivation and manufacturing at its facility in Brookville, PA. According to that release, the expansion project provides an additional 66,000 square feet of indoor and greenhouse cultivation area, bringing the total cultivation space in the facility to 88,000 square feet. Given the supply issues we are seeing across the country, this move promises to translate directly into a boost for top-line data in the months ahead.
This Chicago-based cannabis producer has seen its shares ramp over 100% higher off the March lows, and now sits back where it was in December, with $5/share orders up for grabs.
Cresco Labs Inc (OTCMKTS:CRLBF) frames itself as Cresco Labs Inc., together with its subsidiaries, cultivates, manufactures, and sells medical cannabis and medical cannabis products in the United States.
It offers cannabis in flower, live concentrates, vape, and liquid live resin under the cresco and Reserve brands; precisely-dosed and non-combustible products, including tinctures, capsules, salves, sublingual oils, and transdermal patches under the Remedi brand; culinary-backed under the Mindy's Artisanal brand; fruity confections under the Mindy's Kitchen brand; andpopcorn, shake, pre-rolls, and vapes under High supply brand. It also offers its products under Good News and Wonder brands. As of December 31, 2019, it operated 16 dispensaries in Florida.
And the stock has been acting well over recent days, up something like 21% in that time.
Cresco Labs Inc (OTCMKTS:CRLBF) pulled in sales of $54.6M in its last reported quarterly financials, representing top line growth of 143.9%. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($70.2M against $194.7M, respectively).
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Medical Marijuana Inc (OTCMKTS:MJNA) shares have been sprinting higher in recent days, helped perhaps by news that Aurora just bought up a CBD producer. Perhaps some folks were hoping that Canopy or Aphria might come along and put in a bid for MJNA given its positioning in the CBD space.
Good luck with that. This is not a company thatās going to seem clean under the hood after 20 years of chronic dilution and promotional hype. None of its financial data is regularly audited. And management has chosen to keep it on the pink sheets, where transparency and regulatory hurdles are set at the lowest bar.Ā So, on the M&A front, we wouldnāt advise holding oneās breath.
Medical Marijuana Inc (OTCMKTS:MJNA) bills itself as an investment holding company that operates in the medical marijuana and industrial hemp markets.
Its products range from patented and proprietary based cannabinoid products to seed and stalk or isolated high value extracts manufactured and formulated for the pharmaceutical, nutraceutical, and cosmeceutical industries. The company licenses its proprietary testing, genetics, labeling and packaging, tracking, production, and standardization methods for the medicinal cannabinoid industry.
It engages in the research and development of cannabinoid-based pharmaceuticals; and marketing and distribution of cannabidiol hemp oil-based products. In addition, the company provides management support and services to cooperatives, collectives, health and wellness facilities, and medical clinics; and consulting and securities services to businesses and individuals in the legal cannabis industry.
Medical Marijuana Inc (OTCMKTS:MJNA) generated sales of $16.9M, 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 -4.5% on the top line. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($6.2M against $11M, respectively).
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