New and tenured investors have been taken for quite the ride since the beginning of 2022. Following a year that featured an almost unstoppable uptrend, 2022 delivered a bear market for the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite, as well as the worst single-year returns for these three indexes since 2008.
But don't expect a down year for the markets to change the tune of Wall Street analysts. Though sell ratings do exist, most Wall Street analysts and pundits tend to take an optimistic long-term view on the companies they cover.
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That's especially true for Cantor Fitzgerald analyst Pablo Zuanic. Though Zuanic is known to cover a variety of sectors and industries, it's his coverage of the high-growth cannabis space that really stands out. If Zuanic's most recent prognostications come to fruition, three buzzworthy marijuana stocks will offer between 292% and 753% upside from where they closed last week.
Green Thumb Industries: 267% implied upside
The first cannabis stock that Zuanic believes has a green light for significant upside is U.S. multistate operator (MSO) Green Thumb Industries (GTBIF -5.60%). Zuanic's $30 price target, which has no specific time frame attached, implies shares will make a run at quadrupling at some point in the future.
Among the vast sea of once high-flying cannabis stocks, Green Thumb does look to be on the firmest ground. Despite reporting a generally accepted accounting principles (GAAP) loss during the fourth quarter and breaking its nine-quarter streak of GAAP profits, Green Thumb has been profitable on a full-year GAAP basis in each of the past two years. Most MSOs haven't even had a single quarter of GAAP profit as of yet.
As of the end of 2022, Green Thumb was operating 77 dispensaries and had a presence, be it retail, processing, or wholesale, in 15 legalized states. While some of these are high-dollar markets, such as California, Florida, and Colorado, what really stands out is Green Thumb's push into limited-license states, such as Pennsylvania, Ohio, Massachusetts, Illinois, and Virginia. Although limited-license markets are bound to be more competitive, with regulators capping the number of dispensary licenses issued to single businesses, they also ensure that companies like Green Thumb have the opportunity to build up their brands and gain a loyal following.
What really stands out about Green Thumb's operating model is its revenue mix. Despite dried cannabis flower being the most popular individual pot product, more than half of Green Thumb's sales come from derivative products, such as edibles, vapes, beverages, pre-rolls, dabs, and infused health and beauty supplies. Derivative cannabis products tend to be pricier than dried cannabis flower and, more importantly, possess better margins. Weighting its revenue mix so heavily to derivatives is what's helped Green Thumb crank out GAAP profits more often than not.
With Green Thumb generating positive cash flow from operations, and the company holding plenty of additional retail licenses in its back pocket, an eventual run to $30 per share shouldn't be ruled out.
Trulieve Cannabis: 508% implied upside
A second pot stock that Pablo Zuanic foresees galloping much higher in the future is U.S. MSO Trulieve Cannabis (TCNNF -6.26%). Zuanic's price target of $37 portends that Trulieve's share price will more than sextuple down the line from where it closed this past week.
Similar to Green Thumb, Trulieve Cannabis was one of the few U.S. pot stocks to deliver profits, until recently. A number of non-recurring charges, asset impairments, and divestments, along with increased competition, weighed on Trulieve's operating results in 2022 and caused it to report a sizable GAAP loss and a relatively modest adjusted net loss.
What Trulieve Cannabis does have working in its favor is its large retail cannabis footprint. After opening 25 new dispensaries last year, the company closed out 2022 with 181 retail locations. Approximately two-thirds of these stores are located in medical marijuana-legal Florida. Though fewer than two dozen cannabis retail licenses have been issued in the Sunshine State, there's no cap on how many dispensaries a licensee can open.
Trulieve accounts for around a quarter of Florida's open medical marijuana dispensaries. By saturating the Sunshine State, Trulieve has been able to quickly build brand awareness, while keeping its marketing expenses relatively low.
However, all eyes are on whether the company can duplicate its blueprint for success in other markets. In October 2021, Trulieve completed its acquisition of MSO Harvest Health & Recreation, which made it Arizona's top cannabis retailer. With residents in the Grand Canyon State giving recreational weed the green light in November 2021, Trulieve found itself in the perfect position to capitalize when adult-use sales began in January 2022.
Although it'll likely be difficult for Trulieve Cannabis to gain much traction until it's once again generating adjusted profits, there is an outside chance that a $37 share price becomes possible in a few years.
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Cresco Labs: 753% implied upside
The third buzzworthy marijuana stock that Wall Street analyst Pablo Zuanic believes will absolutely catapult into the stratosphere at some point in the future is U.S. MSO Cresco Labs (CRLBF -5.34%). Based on Zuanic's price target of $14.25 per share, Cresco offers an almost mind-blowing 753% upside from where it finished last week.
As of March 8, the company had 63 operating dispensaries nationwide. Though 28 of these are in Florida, Cresco is following a similar path to Green Thumb in that a lot of its future focus is being placed on limited-license markets. This is a sound strategy for an MSO that, as of now, has a smaller retail footprint than the likes of Trulieve and Green Thumb.
However, Cresco Labs stands on the precipice of a major transformation. Last year, it announced plans to acquire MSO Columbia Care (CCHWF -1.70%) in an all-share deal. If this merger comes to fruition, the combined entity would have more than 130 operating dispensaries spread across 18 legalized states.
The question, of course, is "will the deal close?" While the two companies remain confident that their upcoming combination will be a success, the period of completion for said acquisition has been extended multiple times. The latest extension probably has to do with finalizing the disposition of a dozen facilities to a vertically integrated cannabis company owned by Sean "Diddy" Combs. But should this deal complete, it would instantly make Cresco Labs one of the nation's biggest MSOs by retail footprint and sales.
The other catalyst for Cresco Labs is its industry-leading wholesale cannabis operations. "Wholesale" is something of a dirty word on Wall Street because of the lower margins often associated with wholesale products. However, Cresco Labs, through its January 2020 acquisition of Origin House, became a leading distributor of cannabis in California, the nation's top market for legal weed sales. Being one of the few licensed distributors allows Cresco to place its proprietary products in hundreds of dispensaries throughout the Golden State.
While I'm certainly optimistic about Cresco Labs at its current share price ($1.67), I'll take a rain check on a $14.25 price target until the company generates recurring profits.
