Canadian growers with enough capacity to fill your swimming pool with cannabis oil get a lot more press than slightly smaller marijuana companies focused on a surging U.S. market. If you're looking for marijuana stocks that operate closer to the world's largest market for cannabis, MariMed Inc. (NASDAQOTH:MMNFF) and MedMen Enterprises Inc. (NASDAQOTH:MRMD) are two more recently listed stocks worth getting to know.
Even though marijuana is still illegal at the federal level, the U.S. cannabis market is expected to soar from $11 billion this year to $23 billion by 2022. Which of these cannabis companies is most likely to gain a large share of the exploding domestic market? Let's measure the good against the bad to see which comes out on top.
Reasons to buy
MariMed's consulting service has secured 11 cannabis licenses across five states, and revenue from the company's management, real estate, licensing, consulting, and supply procurement operations is soaring. During the quarter ended in June, the company reported an 81.2% revenue surge.
Investors can probably expect more revenue growth from MariMed in the quarters ahead. During the year ended in June, total assets on the company's balance sheet tripled in size to $45.4 million as the company expands a business model it considers easy to replicate. MariMed's top segment builds the facilities that produce cannabis and the dispensaries that sell it. This means MariMed can collect rent from dispensary owners that purchase products it produces, which includes the moderately popular Tikun Olam brand strains.
MedMen Enterprises operates stores in California, Nevada, and New York. Seven of its locations recently reported annualized per-square-foot revenue of $6,541, which is more than consumers spend in just about any other retail location.
Investors can probably look forward to sales growth ahead. MedMen recently opened its first branded store in downtown Las Vegas, and a second location near the airport is in the works.
Retail is important to MedMen, but the company isn't keeping all its eggs in one basket. Earlier this year, MedMen opened a 45,000-square-foot growing facility, and another is scheduled to open next year. In New York state, MedMen boasts one of 10 medical marijuana licenses, and it recently purchased a dispensary and cultivation license that will allow it to open 30 to 35 new dispensaries in Florida.
Reasons to run
MedMen and MariMed finished June with negative working capital on their balance sheets, which means they're going to need to raise more money from investors soon. Without access to traditional lending, we can expect serious stock dilution ahead from both companies.
MariMed's working capital shortfall of $3.8 million at the end of June is troubling, but MedMen's finances are downright terrifying. MedMen finished March with $86 million in bills due within a year against just $52 million in assets that will be available to pay them.
In the first half of 2018, MariMed reported a respectable $1.1 million operating profit from revenue of just $5.0 million. After giving $6.8 million to employees in the form of share-based compensation, though, the company reported a net loss of $8.2 million during the first half of the year.
During the nine months ended in March, MedMen's operations lost a stunning $29.5 million after collecting just $10.6 million in revenue. In fact, the company spent more on salaries and benefits than it collected in top-line revenue during the period.
The better option
Size doesn't necessarily matter, but MariMed is looking like the better of these two stocks by a mile. For starters, MariMed has proven it can operate its existing canna-business at a profit, which makes its shares a lot easier to hold onto while it invests your hard-earned dollars in expanding its footprint.
MariMed's advantages aren't simply financial. Both of these stocks trade over the counter, which means they can get away with reporting results more slowly than those that list on a major exchange -- some don't report at all. MariMed showed it's ready to be taken seriously by reporting earnings for the quarter ended in June in mid-August, while MedMen doesn't expect to present results from that period until some time next month.
Until MedMen shows it can operate without losing sums it can't afford, you're probably much better off with MariMed.