If you're looking for a top marijuana stock to add to your portfolio, two worth considering are Columbia Care (CCHWF -1.70%) and Jushi Holdings (JUSHF -6.93%). Both have been posting some strong numbers and are expecting more growth ahead. They operate in some great markets, and could become much hotter buys in the future.
Is Columbia Care, with its larger footprint across the country, the safer bet for growth investors, or would you be better off buying shares of Jushi Holdings, which is coming off an explosive performance in 2020?
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The case for Columbia Care
Columbia Care is one of the top multistate operators, with 126 facilities total and licenses in 14 states and the District of Columbia. And its business continues to get bigger. Most recently, the company announced the launch of its medical marijuana operations in West Virginia. Columbia Care has also been growing its presence in Ohio; on July 2, it announced that it completed the acquisition of CannAscend, which has four dispensaries in the state. For Columbia Care, Ohio is a "top-five market" in which its sales have grown 110% year over year. It's also a limited-license state, meaning there aren't many dispensaries there (0.4 dispensaries per 100,000 people is minuscule compared with, for example, Oregon, which is at more than 16 dispensaries per 100,000). And in June, it completed a much larger acquisition of multistate operator Green Leaf Medical, which has operations in Maryland, Ohio, Pennsylvania, and Virginia.
There could be plenty more M&A to come from Columbia Care, as the company had cash and cash equivalents of $176 million as of the end of March -- compared to just $26 million a year earlier. With long-term debt accounting for $77 million, the business has plenty of room to seek out more acquisitions if it so chooses. And the great news for investors is that some solid growth is already expected.
Columbia Care forecasts that its 2021 revenue will climb as high as $530 million, with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of up to $105 million -- for a margin of 20%. That would close to triple the $180 million in revenue that the company reported in fiscal 2020. Its adjusted EBITDA last year was a loss of $4 million.
Year to date, the pot stock is down 23% while the Horizons Marijuana Life Sciences ETF has risen by more than 20%. However, that could have been caused by some investors cashing out their gains -- in 2020, Columbia Care's stock soared 143% while the Marijuana Life Sciences ETF was down 10%.
The case for Jushi Holdings
Jushi operates in some of the same markets that Columbia Care does. And on July 15, it closed on a deal to acquire Ohio-based cultivator OhiGrow. However, Jushi is more focused on the Pennsylvania market, where the bulk of its retail operations are. In June, it opened its 13th Beyond/Hello location in the state (the 20th in the country).
Pennsylvania is another relatively uncompetitive market, with about 0.6 dispensaries per 100,000 people. However, the market is also more lucrative than Ohio's; cannabis data company Headset estimates that from April 2020 to March 2021, the medical marijuana market in Pennsylvania brought in more than $900 million in revenue. Ohio, meanwhile, is less than half that size and is on track to hit more than $400 million this year.
Jushi has a presence in just seven states, but that more compact footprint can work to its advantage, as those are some of the more attractive markets in the country. Besides Ohio and Pennsylvania, it is also in California, Nevada, Illinois, Virginia, and Massachusetts -- markets where pot is legal for recreational use. By carefully picking its spots, Jushi can avoid spreading itself too thin, which can help it keep its costs down even as it generates strong sales numbers.
The company reported its first-quarter earnings for the first three months of 2021 on June 9, and revenue of $42 million was up 29% from Q4 2020. It credits the improved results primarily to its growth in both the Pennsylvania and Illinois markets. For the second quarter, it projects up to $48 million in sales and adjusted EBITDA of as much as $6 million, for a profit margin of 13%. That's on top of an already phenomenal 2020 during which sales soared 690%.
Like Columbia Care, Jushi is sitting on a much larger pile of cash than it had a year ago; cash and cash equivalents of $162 million as of the end of Q1 were more than four times the $36 million it had on hand at the end of the same period in 2020. With debt totaling only $54 million, Jushi is in an excellent position to take on more growth opportunities.
Jushi is down 12% year to date, and the stock may simply have run out of room to rise (at least for now); last year, its shares rose by an incredible 325%.
Which stock should you go with?
In terms of valuation, there isn't a whole lot separating these two companies. Both are trading at about 4.9 times revenue.
CCHWF PS Ratio data by YCharts
However, the edge has to go to Columbia Care. The company is generating stronger adjusted EBITDA margins and is operating in more markets, including New York and New Jersey, which could be among the hottest states for marijuana right now after having recently legalized the substance for recreational use.
