The marijuana industry is flowering before our eyes. Having long been an industry that was considered taboo, legal weed wound up generating $12.2 billion in global sales in 2018. And according to Arcview Market Research and BDS Analytics, it is on its way to hitting more than $31 billion in sales by 2022.

Even though Canada is the only industrialized country in the world to have legalized recreational marijuana, it's the United States that offers the greatest long-term potential for the industry and marijuana stock investors. Bank of America analyst Christopher Carey recently tossed out a pie-in-the-sky peak annual sales figure of $166 billion for the cannabis industry, with the U.S accounting for 34% of the addressable market. That makes recreationally legal U.S. states highly sought after, and closely watched, by the investment community.

An aerial view of the Las Vegas Strip.

The Las Vegas Strip. Image source: Getty Images.

Nevada's burgeoning cannabis industry is turning heads

One state that has the full and undivided attention of marijuana investors is the home of "Sin City," Nevada. Having kicked off recreational cannabis sales on July 1, 2017, the Silver State wound up delivering $529.9 million in total sales through June 30, 2018, $424.9 million of which was tied to the adult-use market. All told, Nevada collected $69.8 million in tax revenue, which was 40% higher than had been projected for the state's first year of recreational sales. 

But Nevada's pot market is just getting started. Considering the influx of tourists to Las Vegas each year, and the fact that it's one of the fastest-growing states by population, the cannabis market has a real chance of surpassing $1 billion in annual revenue. Should that happen, pot stocks with a focus on the Nevada market could thrive.

If you want to roll the dice on cannabis in Nevada, here are three budding pot stocks to consider.

A view of case lines filled with dried cannabis strains in Planet 13's SuperStore.

Planet 13's SuperStore in Las Vegas. Image source: Planet 13.

Planet 13 Holdings

Nothing says "recreational marijuana is legal in Nevada" quite like the largest dispensary in the entire country. Planet 13 Holdings (NASDAQOTH:PLNHF), which holds a handful of retail operating licenses, is laser-focused on its SuperStore, which is just off the Strip. Currently spanning 16,200 square feet, this mecca among cannabis stores will eventually reach 112,000 square feet, or about 7,000 square feet larger than the average Walmart.

Having visited the Planet 13 SuperStore in Las Vegas in April, I can attest that it offers quite the experience for consumers, which could translate into long-term gains for investors. What's most impressive is the company's incorporation of technology into its store, as well as its layout, which is primed to drive high-margin purchases.

Throughout Planet 13's flagship store are a number of self-pay kiosks that allow consumers to avoid lines that regularly surpass one dozen customers. Although these shoppers will still need to wait for a Planet 13 budtender to grab their product, it's a means of personalizing the cannabis-buying experience for repeat shoppers, and those who know exactly what they want.

Planet 13's layout also features traditionally lower-margin cannabis flower (of which the company appeared to have at least eight dozen strains) in the back of its stores, requiring consumers to walk past higher-margin derivatives and cannabis paraphernalia. These high-margin products are also in close proximity to the points of sale. With customer traffic on the rise, Planet 13 and its SuperStore are worth eyeing.

An up-close view of flowering cannabis in an indoor growing facility.

Image source: Getty Images.

Flower One Holdings

If the largest retail store in the United States isn't your thing, then perhaps consider very under-the-radar small-cap grower Flower One Holdings (NASDAQOTH:FLOOF).

When I say that Flower One is all about Nevada, I mean that this company is literally all about Nevada. It has two grow facilities, both of which are in the state. And, as you probably know, since marijuana remains illicit at the federal level, none of this production can be transported out of state. That means this company is all-in on Nevada's budding marijuana market.

The first facility, which is fully operational, comes courtesy of the company's acquisition of NLV Organics during the fourth quarter of last year. The cultivation farm, in North Las Vegas, spans 25,000 square feet across nine grow rooms and is capable of harvesting from 4,500 plants per growing cycle. This cash-and-stock deal set Flower One back $27.2 million. 

The other cultivation farm -- the largest in Nevada -- is Flower One's flagship facility. Also in North Las Vegas, this farm spans 455,000 square feet, approximately 400,000 of which will be devoted to growing plants, with the remaining 55,000 square feet devoted to processing dried flower and creating derivative or infused products. The company claims it's capable of 148,000 pounds of production per year at its peak, working out to a little more than 67,000 kilos a year. That's superior yield considering that Canadian growers are averaging closer to 100 grams per square foot

Although it's still a very new grower and is in the process of developing its flagship facility, Flower One is worth a spot on your radar if Nevada's marijuana market is in your sights.

Two miniature shopping carts, one of which contains a cannabis flower, the other of which holds cannabis oils.

Image source: Getty Images.

Green Thumb Industries

If you'd prefer a countrywide player, but one that still has a sizable presence in the Nevada cannabis market, then consider vertically integrated multistate operator Green Thumb Industries (NASDAQOTH:GTBIF).

Green Thumb is unquestionably the largest and most established of these three companies. It currently has more than a dozen open retail locations, primarily under the Rise brand, along with 11 manufacturing facilities. Again, since cannabis cannot be transported across state lines, vertically integrated dispensaries like Green Thumb need to produce and process within the states where they also sell.

In terms of aggregate retail licenses, Green Thumb had 77 as of May 23, likely making it the country's third- or fourth-largest aggregate license holder among retail dispensaries. In December, the State of Nevada wound up awarding another 61 provisional retail licenses for recreational marijuana, which pretty much doubled the just over five dozen licenses it had previously issued. Among these provisional awards were eight licenses for Essence, a brand that had been owned by Integral Associates, but which was acquired by Green Thumb Industries. Essence is also the first and only dispensary licensed to operating on the Las Vegas Strip. 

The ramp-up from 0 to 60 m.p.h. will be most noticeable with Green Thumb, relative to Planet 13 and Flower One, with sales expected to more than triple to $195 million in 2019. Profitability, though, could be a ways off because of the spending associated with constructing grow farms and processing facilities, and getting dispensaries branded and stocked properly. Nevertheless, Green Thumb is the biggest name to watch in the flowering Nevada marijuana market.