The stock market is full of stories of valuations of individual companies that have fantastic growth, but fail to show their true value over the long term. This is often because of the lack of valuation metrics that we can truly understand, with the exception of the 10-year average P/E ratio, which shows the stock price relative to the company’s revenue.
There are many factors that may drive down the price of cannabis stocks. Just like any other market, let’s take a look at the factors behind the current trend of falling cannabis stocks.
Some investors buy into the hype, others follow the money. The fact remains that there are still many merits to investing in this little-known sector of the market. Besides, cannabis has a lot of potential to grow. What the future holds for legal marijuana, remains to be seen.. Read more about best stocks to buy now 2021 and let us know what you think.
These businesses are ensuring their future by making themselves essential to their clients.
Points to Remember
- Over the next decade, the global cannabis industry will continue to expand quickly.
- In the marijuana market, there are many ways for companies to profit.
If you’re enthusiastic about where the cannabis business will be in 2031 — and you should be, given the sector’s anticipated growth — buying and holding a few of the finest marijuana stocks on the market is a smart idea.
Each of the three businesses I’ll talk about today focuses on a different area of the marijuana industry. And they all have a clear route to consistent but enormous development, even if they’re just now realizing it. Let’s take a look at why they may be a suitable fit for your portfolio.
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1. Scotts Miracle-Gro (Scotts Miracle-Gro)
Cannabis growers can’t get enough of Scotts Miracle-(NYSE:SMG) Gro’s nutrients, fertilizers, hydroponics equipment, and grow lights. It also has a large selection of insecticides and herbicides for home gardening. Scotts caters to both home tomato growers and marijuana business giants in these two divisions. And it’s the latter of those two factors that make the stock worthwhile to keep for the next ten years.
Even while sales of consumer gardening equipment in the United States fell 4% in the third quarter compared to the previous three months, income from cannabis cultivation-related goods increased by 48%. As if that weren’t enough, management forecasts a 45 percent increase in income from marijuana cultivation goods by 2021 compared to 2020.
If the cannabis business continues to expand at its current rate, it’s difficult to see a future where Scotts’ goods aren’t in high demand as well. There will be even more regional markets to penetrate and fuel future development if cannabis is legalized in additional areas. Best of all, investors don’t have to be concerned about the company’s approach to the ever-changing specifics of cannabis product preferences. Scotts doesn’t need to sell a single bud of marijuana flower to keep its clients coming back for more.
Green Thumb Industries is number two on the list.
Green Thumb Industries (OTC:GTBIF), unlike Scotts Miracle-Gro, is a consumer cannabis pure-play, meaning it lives or dies solely on the popularity of its recreational and medical marijuana products. Given its steady and fast revenue growth over the past five years, this does not seem to be an issue. Green Thumb may generate more than $800 million in net sales this year if Wall Street analysts’ estimates are accurate.
Green Thumb’s distribution networks and brand power are its main assets. By August 10, the firm aims to have 62 retail sites distributed throughout the United States, including profitable areas such as Pennsylvania, California, and Massachusetts. Even more shops are expected to open in the following years. While some of its areas are becoming more saturated with rivals, this does not seem to be an issue thus far, since same-store sales are increasing fast.
As long as same-store sales continue to rise, the business will continue to expand its regional footprint. Customers are developing loyalty to Green Thumb’s brands, similar to how they have favorite brands of beer or other packaged products, which will minimize the effect of rivals. Similarly, Green Thumb’s intentions to begin providing cannabis delivery via its digital and retail experiences adds another distinction that will help the company continue to expand over time.
Consumers will be less hesitant to purchase the company’s goods if income from delivery begins to increase. This would also strengthen its brand among consumers who choose not to shop at its retail sites. The combination of a rising base of loyal consumers and effective multi-channel distribution will result in a substantially higher top line than rivals over the next decade.
And, if the business maintains its spending discipline, it has a strong chance of being profitable for the next decade as it expands into new areas. There isn’t much better than that for a cannabis grower.
YCHARTS PROVIDED THE DATA.
3. The Group of the Twenty-First Century
The 22nd Century Group (NYSEMKT:XXII) is a bit of an outlier in that it neither sells cannabis to consumers nor provides nutrients or equipment to marijuana growers. The intellectual property (IP) of 22nd Century, which encompasses its cannabis genetics technique, is its claim to fame. Customers may boost the production of important psychoactive compounds from their own cannabis crops by using the company’s hemp genetics expertise.
Cultivators’ profits rise when more of the active component is found in each plant, so there’s a strong incentive to license 22nd Century’s technology. It also includes a commercial section that separates and sells compounds made from in-house produced plants. As a result, there are many types of customers with whom it may do business, ensuring the long-term viability of its income.
Importantly, the plant genetics IP took a long time to establish, and it just lately began to generate income. Management expects license revenue to start increasing in the second half of 2021, but this is likely only the beginning. Cultivators are unlikely to want to quit paying for 22nd Century’s technology after they’ve become addicted to greater profits.
Furthermore, the business is continuously developing new genetic breakthroughs for cannabis plants in order to increase yields even further. As its plant genetics platform matures, it has the potential to become one of the most significant suppliers in the cannabis business.
Things have changed in the marijuana industry over the last five years. The industry as a whole has come a long way in a short period of time. There are now three successful and well respected cannabis companies that have gained massive amounts of momentum.. Read more about best marijuanas stocks 2021 reddit and let us know what you think.
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