Following Bernie Sanders’ victory in New Hampshire, we have received an influx of questions on the cannabis companies that would benefit from him being elected president of the United States.
Bernie Sanders has previously stated that he would support the legal cannabis industry and highlighted plans to legalize the plant if he is elected as president. We would expect the cannabis industry to report unprecedented growth under Sanders if he was elected as the next president and for US companies to be the greatest beneficiaries of such outcomes.
Today, we want to highlight 3 cannabis companies that would benefit from a change in leadership and believe that these are opportunities that our readers should be aware of. Although the chances of Bernie being elected as president are slim, we find it important to discuss the what if as it relates to the cannabis industry.
C21 Investments: A US Opportunity that is Flying Under the Radar
Last week, we started to follow C21 Investments Inc. (CSE: CXXI) (OTCQB: CXXIF) and believe that this is a US opportunity to be following. We started to follow the company after President and CEO Sonny L. Newman issued a letter to shareholders that highlights the recent accomplishments and we found this to be significant.
In the letter, C21 highlighted the performance of the operations during the last fiscal year and its strong growth during this time. The company reported $10.6 million of revenue and $2.2 million of positive Adjusted EBITDA during the third quarter which represents incremental growth on a comparative basis and we believe that the market does not fully appreciate this.
C21 has attractive leverage to burgeoning cannabis markets in the US and we are most excited about the Nevada asset which recorded over 635,000 customer transactions in the third quarter. The company has been focused on right-sizing operations and integrating its Oregon assets to achieve further efficiencies. We believe that C21 has attractive potential catalysts for growth and we find this to be significant.
C21 is one of only a handful of public US operators that have reported positive operating cash flow and we believe that this aspect of the story is not appreciated by the street. The company has an attractive risk-reward profile and is an opportunity that has been flying under the radar. C21 has been under pressure with the rest of the cannabis sector and we believe that the market could be missing out on something significant.
Going forward, we expect C21 to report several important developments due to the relationship that it has with Eight Capital and with CB1 Capital. These firms are working to identify the best strategic options to execute its corporate growth plans, as well as to increase financial flexibility in managing debt. We believe that C21 is reaching an inflection point and will continue to keep this opportunity on our radar.
Is Legalization in the US a Positive for Innovative Industrial Properties?
Although Innovative Industrial Properties, Inc. (IIPR) is the largest cannabis real estate investment trust (REIT) in the US and is expected to be one of the greatest beneficiaries of the cannabis movement, the legalization of cannabis in the US could prove to be a headwind for the business.
The lack of clarity in the US has supported Innovative Industrial Properties as it relates to the amount of money it can charge its tenants. The company has signed long-term leases with its tenants and has been highly focused on acquiring properties and forming strategic partnerships.
Through a series of acquisitions and capital raises, Innovative Industrial Properties has been able to significantly expand its footprint across the US. During the last few quarters, the company has recorded strong growth, and this is a trend that is expected to continue due to the acquisitions by the business.
One of our concerns for the business is related to the legalization of cannabis in the US. Once cannabis is legal, Innovative Industrial Properties will face increased competition and will need to lower its rates to remain competitive. We believe that the company is speeding up the pace of acquisitions to be better positioned for this potential shift and we will keep an eye on this aspect of the story.
Innovative Industrial Properties has come well off its recent lows and momentum has been trending to the upside. We believe that this is an opportunity to be watching and will be keeping a close eye on how the story evolves from here.
GW Pharmaceuticals: A Biotech Cannabis Company
While many investors had initially focused on the cannabis opportunity in Canada, GW Pharmaceuticals (GWPH) was the first big name in the space. The Nasdaq traded biotech cannabis company has been operational for almost two decades and we are impressed with how the story has evolved during this time.
During the last few quarters, GW has been reporting incremental revenue growth and this is a trend that is expected to continue. A few weeks ago, the company reported preliminary quarterly financial results that came in above expectations and we are favorable on the growth profile that is associated with the business.
GW has been highly focused on ramping revenues in the US and abroad and we are bullish on the growth prospects associated with the opportunity. The company has been working to bring new pharmaceutical products to market and this would prove to be a major catalyst for the business.
GW has outperformed the cannabis sector so far this year and we are bullish on the growth prospects that are associated with the business. Over the next year, we expect GW to report continued growth and this is an opportunity to be watching.
