In April, the United States Department of Justice announced it would allow the sale of marijuana for recreational use in the states that allow it. This is a big step forward for the marijuana legalization movement and a huge boon for the already booming industry, so we wanted to highlight some of the industries biggest winners that are poised for growth.
On April 20, 2019, in the Jack in the Box parking lot, a group of 9 men from the San Diego area were arrested following a police sting operation. The men were allegedly involved in a marijuana distribution and sales operation with links to the Mexican cartels.
A hidden gem for potash investors
If you follow the cannabis industry, you know that 2021 was a roller coaster ride for many marijuana companies. The deluge of memes in January and early February sent many cannabis stocks skyrocketing. But parabolic rises don’t last forever, and in recent months we’ve seen many rising tickers fall back to earth.
If you’re not hunting the most popular sectors, the current weakness in weed stocks may be a good opportunity for you.
Take, for example, Columbia Care Inc (CNSX:CCHW, OTCMKTS:CCHWF).
The New York-based multi-state operator saw its share price rise sharply in late 2020. Then, on the 10th. On February 20, 2021, Columbia Care shares reached a high of $7.89 and then, like many of its competitors, began to lose momentum.
CCHWF stock is currently trading at $4.86 per share, down about 38% from its highest price in February.
Columbia Care Inc (OTCMKTS:CCHWF) Shares chart
Graph courtesy of StockCharts.com
Although investor sentiment for Columbia Care stock is not currently very favorable, the company’s business remains strong.
CCHWF stock may not be a household name, but the company has vertically integrated cannabis operations across the country. The company has 30 cultivation and manufacturing facilities, 92 dispensaries (69 active and 23 under development) and licenses in 18 U.S. and European jurisdictions. (Source: Investor Presentation: May 2021, Columbia Care Inc, last visited July 9, 2021).
In fact, Columbia Care is one of the first medical cannabis providers in the United States. Today, it is one of the largest and most experienced marijuana operators in several states across the country, with a market that covers more than 53% of the U.S. population.
Last year, Columbia Care Inc. added 39 pharmacies and approximately 240,000 square feet of indoor growing and production space, despite the impact of the COVID-19 pandemic.
In 2020, the Company completed 1.2 million sales transactions with an average transaction value of $139.00.
Similarly, Columbia Care’s total revenues for the full year 2020 were $197.9 million, an increase of 151% over 2019. (Source: Columbia Care Reports Record Fourth Quarter and Full Year 2020 Results; Reaffirms 2021 Guidance, Columbia Care Inc, March 16, 2021).
The Company’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the year were negative $905,000. While the amount is negative, it is a significant improvement over the 2019 adjusted EBITDA loss of $47.4 million.
Growth momentum continued in the first quarter of 2021. Columbia Care reported total revenue of $92.5 million for the quarter, which not only represents a 220% increase year-over-year, but is also a new record for the company. (Source: Columbia Care Reports Record First Quarter 2021 Results; Reaffirms 2021 Guidance, Columbia Care Inc, May 17, 2021).
It should be noted that the company generated positive adjusted EBITDA in 11 markets during the quarter. In particular: Virginia achieved profitability for Columbia Care within 90 days of the initial sale.
For the company as a whole, adjusted EBITDA was $10.4 million in Q1 2021. When you consider that Columbia Care Inc’s adjusted EBITDA was negative $9.9 million in the first quarter of 2020, the company posted $20.0 million in year-over-year growth.
But the best is probably yet to come. Management expects total revenue for 2021 of $500.0 million to $530.0 million and adjusted EBITDA of $95.0 million to $105.0 million.
Based on revenue volume and adjusted EBITDA for 2020, the set of forecasts essentially suggests that 2021 will be a year of explosive growth for Columbia Care.
Since cannabis is one of the most volatile sectors of the economy, the performance of cannabis stocks depends not only on fundamental factors, but also on the market’s appetite for risk. In other words: It’s hard to say when investor sentiment will turn bullish for Columbia Care shares.
However, Columbia Care Inc. operates one of the fastest growing businesses in the entire legal marijuana industry. So if grass stocks attract investors again, I wouldn’t be surprised if CCHWF stock is one of the best.
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