The marijuana industry has been on a roller coaster ride since 2020. The pandemic sure did boost marijuana sales. The ramp-up of U.S. state legalization further uplifted the performance of cannabis companies. But soon all the highs came crashing down when there was no positive movement toward U.S. federal legalization.
But smart investors are aware that highs and lows are very common in an evolving industry. Even if there is no movement yet, that doesn't mean federal legalization will never happen. Besides, the U.S. cannabis companies are doing exceptionally well even in a limited legal market and are poised to grow no matter when legalization happens. Amid this sea of exciting pot stocks, there are two monster stocks in the making. Let's take a look.
Green Thumb Industries
Illinois-based Green Thumb Industries (GTBIF -0.58%) is one of the fiercest cannabis stocks right now. Besides holding 75 operating dispensaries, it holds an additional 114 retail store licenses in 14 U.S. markets. Since cannabis is still illegal at the federal level, states are careful about how many licenses they issue to each cannabis operator.
Many more states are working to legalize recreational marijuana this year, which is a burgeoning market in the U.S. Thus, holding such a huge number of additional licenses gives Green Thumb a competitive edge over its peers.
Green Thumb hasn't disclosed yet how and when it plans to use them. But it will have the advantage to establish a strong presence when more states make cannabis legal. Its total store count increased to 73 nationwide after it acquired Minnesota-based LeafLine Industries at the end of 2021. Recently, the company added two more store counts to its total by opening dispensaries in Virginia.
Increased traffic from its 65 operating dispensaries at the end of the third quarter helped this multi-state operator (MSO) with another great quarter. Total revenue of $233.7 million came in 49% higher from the year-ago quarter. Green Thumb's also reported its fifth consecutive quarter of profitability, wherein GAAP net income of $20.8 million came in higher than the net profit of $9 million in the year-ago period.
The new recreational cannabis market in its home state (where it operates nine stores) turned out to be a plus point for the company. Illinois legalized recreational cannabis in January 2020, and since then sales have been soaring. By 2021, recreational sales in the state hit $1.3 billion.
From 40 stores at the beginning of 2020 to 73 now, the company has come a long way. It opened 15 new stores last year. Given its rapid expansion and the additional licenses it holds, it will be interesting to see how many stores it opens this year. Besides increasing revenue and profits, the company is financially sound to fuel its expansion this year. It ended the third quarter with cash and cash equivalents of $285.8 million and outstanding total debt of $206.5 million.
We will know more of its 2022 growth strategies when Green Thumb reports its fourth-quarter results on March 1.
Florida-based Trulieve Cannabis (TCNNF -0.17%) started as a small medical cannabis company in its home state but now operates 161 dispensaries nationwide. It dominates the Florida market with 112 dispensaries. Though the company doesn't have a wider footprint like Green Thumb, it is established in some key cannabis markets like California, Connecticut, Massachusetts, and West Virginia. Its acquisition of Harvest Health (completed in October 2021) gave it access to the Arizona, Pennsylvania, and Maryland cannabis markets.
The Harvest acquisition has already started benefiting Trulieve. Management stated in the Q3 earnings call that post-Harvest acquisition, the company saw a "35% increase in the revenue run rate."
Total revenue in the quarter surged 64% year over year to $224 million, while net profits jumped 7% to $19 million from the year-ago period. Trulieve has made profits for 15 consecutive quarters now, impressive for a company operating in a limited legal market. This implies how much more room it has to grow once marijuana is federally legalized. Trulieve expects full-year revenue to come in the range of $815 million to $850 million and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to be in the range of $355 million to $375 million.
Trulieve might not yet have a stronghold in the recreational market like Green Thumb, but the company is taking small steps to expand in this segment. The company ended Q3 with a cash balance of $213.6 million and no debt.
Both pot stocks have a bright future
Trulieve and Green Thumb have brought in around $801 million and $827 million in revenue over the trailing 12 months. Both companies are set to achieve $1 billion in revenue for the full year. Industry experts predict more states are set to legalize marijuana this year, which will set a smooth road for these two pot companies.
Wall Street analysts expect 176% and 94% upside for Trulieve's and Green Thumb's stocks for the next 12 months. The recent sell-off in marijuana stocks has made Trulieve's and Green Thumb's shares dip 50% below their 52-week high. This presents the right opportunity for investors to buy them at the dip and hold them for the long haul.