The coronavirus pandemic has not been a particularly good thing for the cannabis sector, which was already in trouble due to a range of issues. However, even though the situation may not be as good as many might have accepted, there are still some top marijuana stocks to consider in May. Investors could do well to take a look at some of the best marijuana stocks if they are interested in this sector this month.
That being said, it is also important to keep in mind that even if one tracks the top marijuana stocks to play in May, they must take a very close look at the company. The markets are quite volatile at the moment, so one needs to be careful with the marijuana stocks one picks.
Here is a look at three top marijuana stocks to consider.
Green Thumb Industries (GTI) is one of the biggest multi-state operators in the United States, and there are some compelling reasons why it is among the best marijuana stocks in May. Although it is true that medical marijuana has been legalized in 33 states in the country, the situation still remains pretty tough for most companies. Taxes and fees inflate the costs by 50%, thereby making products uncompetitive. However, at the same time, it should be kept in mind that Green Thumb does the full process itself, from seed to the final sale of the manufactured products.
The company has managed to grow on its own and by making strategic acquisitions that have come in handy. On top of that, it has 96 retail licenses as of now. In 2019, GTI made $3.5 million in positive EBITDA earnings despite making a loss of $59.5 million, which indicates that the company could become profitable soon. In addition to that, GTI has been an excellent exponent of the sale-leaseback agreement, raising $105 million in senior secured debt. Liquidity does not appear to be a problem for the company, unlike many other companies in the business.
Best Marijuana Stocks to Play in May 2020: Innovative Industrial Properties Inc (NYSE:IIPR)
Profits have been elusive for most companies in the cannabis space, but that’s not the case with Innovative Industrial Properties (IIP), which is why we’ve included it as one of the possible marijuana stocks for May. The company runs a real estate investment trust, working primarily with cannabis producers. On top of being profitable, IIP is also known for paying dividends. The dividend yield is 5% at this point.
The company has performed admirably in recent times. In 2019, its revenue jumped to $44.7 million, which reflects a year-on-year rise of 202%. Net income rose by 293% to hit $22.1 million, and earnings per share stood at $2.03, which reflects a rise of 171%.
Since marijuana companies cannot get financing from banks, they have to turn to entities like IIP and conduct sale-leaseback agreements to raise cash. Because of this, the company has managed to grow its holdings considerably.
A potential danger for IIP is the possible legalization of the cannabis industry at a federal level. If that happens, traditional financial channels will open up for companies, and IIP’s main revenue stream will dry up. That being said, as of now, it is among the most promising companies in the sector.
Anyone looking for the top marijuana stocks can hardly ignore Canopy Growth, which is the biggest cannabis company in the world by market cap. Late Friday, the company made a major announcement that could prove to be a major trigger for further growth. Maker of Corona beer, Constellation Brands (NYSE:STZ), is the biggest investor in Canopy, and last week, it upped its stake in the company to 38.6%. Constellation can exercise its warrants in Canopy Growth worth C$245 million that it picked up in 2017.
The news came as a major boost for Canopy Growth since it demonstrated that its main investor is optimistic about its growth in the future. CGC stock rose by 5% to 16.03 on Monday.
Canopy also stands to be one of the beneficiaries if the cannabis 2.0 marker manages to grow meaningfully. Canopy has gone into the beverage segment aggressively, and the company’s CEO has noted that the products have been selling well.