A 2020 Gallup poll found that 68% of Americans support marijuana legalization. So far, 19 U.S. states (including the District of Columbia) have legalized recreational marijuana use and 36 states have legalized medical marijuana.
With such high approval ratings and growing legalization, you may think you're a bit behind the growing trend. Good news: There's still plenty of opportunities to capitalize on cannabis legalization.
So, where to turn in this booming industry? The heavy hitters? The slow up-and-comers? The companies that initially ramped up but have shown disappointing results of late? They're all worth considering, but not without serious research.
We'll go over why to consider marijuana stocks and three stocks you may want to add to your portfolio.
Why Consider Marijuana Stocks?
Opportunities abound, whether you invest in marijuana growers and retailers, ancillary product and service providers or marijuana-focused biotechnology companies.
It might scare you a little that cannabis stocks bent over in the second half of 2021 after U.S. federal regulatory reform barricaded broad ownership of cannabis equities by institutional investment managers. Plus, the increased competition may trouble you: Which companies really do have an edge over competitors?
In addition, the Secure and Fair Enforcement (SAFE) Banking Act is in the hands of lawmakers — the House continues to pass provisions that would allow cannabis companies to access the banking system. However, there is bipartisan support to pass federal banking reform. But even so, you face several risks — government regulation and legalities, inflated share prices, high operating costs and more.
However, landing on a golden nugget can pave the way for your portfolio, maybe for many years ahead.
Cresco Labs Inc., headquartered in Chicago, cultivates, manufactures and sells retail and medical cannabis products in the United States through flowers, vape pens, live resins, disposable pens, extracts, popcorns, shakes, pre-rolls and vapes, edibles, capsules, salves, ingestibles, sublingual oils, transdermal patches, confections, gummies and more under its many brands. It owns and operates 32 dispensaries, as well as 44 retail licenses. The company is headquartered in Chicago, Illinois.
Third quarter 2021 financial highlights include revenue of $215.5 million, an increase of 2.6% quarter-over-quarter and 40.6% year-over-year. Gross profit excludes fair value mark-up for an acquired inventory of $116.7 million or 54.2% of revenue, an increase of 9% quarter-over-quarter and 48.3% year-over-year. The company also showed adjusted EBITDA of $56.4 million or 26.2% of revenue, an increase of 24% quarter-over-quarter. Record net wholesale revenue hit $109.3 million and record retail revenue hit $106.2 million from 37 stores.
What's the deal with Scotts Miracle-Gro and why is it on our list?
Scotts Miracle-Gro Co., headquartered in Marysville, Ohio, manufactures, markets, and distributes systems and accessories for hydroponic gardening — there's your cannabis connection. Scotts Miracle-Gro has several segments, including the U.S. consumer segment, the consumer lawn, and garden business and the Hawthorn segment (which includes its indoor, urban, and hydroponic gardening business). The U.S. and product sales occur through commercial nurseries, greenhouses, and other professional customers.
Company-wide sales in the quarter decreased 24% to $566 million from $748.6 million a year ago. For the quarter ended January 1, 2022, the company reported a seasonal loss from continuing operations of $0.90 per share. The non-GAAP adjusted loss was $0.88 per share.
For the fiscal first quarter 2022, Scotts Miracle-Gro Co. reported sales of $566.0 million, down 24 percent . First-quarter sales for the Hawthorne segment decreased 38% to $190.6 million. Supply chain disruptions also contributed to the decline. The segment reported a loss of $5.3 million in the quarter compared to income of $40.4 million a year ago. U.S. Consumer segment sales decreased 16% to $342.4 million. U.S. Consumer increased full-year sales guidance in the segment to a range of plus 2% to -2%. This compares to a previous range of flat to -4%.
The company-wide GAAP and non-GAAP adjusted gross margin rates were 21% compared with 25.5% and 26.7%, respectively, a year ago. The decline was driven primarily by a decrease in fixed cost leverage as well as higher material, warehousing, and distribution costs and was partially offset by increased pricing benefits as well as favorable segment mix. Selling, general and administrative expenses (SG&A) decreased 2% to $154.1 million.
Jazz Pharmaceuticals Plc, headquartered in Dublin, Ireland, is a biopharmaceutical company that focuses on the identification, development and commercialization of pharmaceutical products in the areas of narcolepsy, oncology, pain and psychiatry and its products include Xyrem, Xywav, Sunosi, Erwinaze, Vyxeos, Defitelio and Zepzelca.
Total revenues increased 39% to $838.1 million compared to Q3 2020, and 52% of net product sales came from recently launched or acquired products. Xywav for narcolepsy has approximately 6,000 active patients at the end of Q3 and Epidiolex revenue growth of 21% compared despite COVID-19 pressure.
Top-tier launch has established Zepzelca as second-line SCLC treatment of choice and Rylaze launch has come from key stakeholders. Key trial initiations are also moving forward for JZP385, JZP150 and Zepzelca.
Take Advantage of Cannabis Headwinds
Good news: There's no one way to invest in the cannabis industry. Whether you pick cannabis producers, companies with small exposure to the industry or medical marijuana stocks, you can go about six million avenues.
Follow the green rush and do your research before you decide whether cannabis makes the most sense for your needs. Consider the legal and political risks, supply and demand imbalances, over-the-counter (OTC) stock risks, and more. Furthermore, get a clear understanding of the management team of each company, growth strategies, financial statements and more.
Before you consider Jazz Pharmaceuticals, you'll want to hear this.
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