Enormous sales growth, improved operating efficiency, and positive EBITDA sum up how these two pot stocks performed in their most recent quarter.
With few exceptions, marijuana stocks have been practically unstoppable over the past year. Just two of the dozen largest marijuana stocks by market cap are lower over the trailing 12 months, and a majority have witnessed their market caps double in value, if not vault even higher. Three major catalysts, in particular, have been behind the green rush.
Why pot stocks are soaring.
To begin with, we’ve witnessed a discernible shift in how the American public thinks about cannabis. A little more than two decades ago, only a quarter of the population wanted to see it legalized nationally. As of 2016, this figure had risen to 60% according to Gallup, an all-time high. A separate survey from Quinnipiac University this April found 94% support for the legalization of medical cannabis. Overwhelming support like this could pressure politicians in Washington to change their tune on weed.
Secondly, legal sales growth has been phenomenal. Cannabis research firm ArcView pegged North American retail sales growth at 34% in 2016, and predicts that the average growth rate through 2021 could come in at 26%. This would put the North American legal cannabis market on pace for nearly $22 billion in sales.
Lastly, we’ve seen expansion throughout North America. In June, Mexico legalized medical cannabis, while our neighbors to the north are debating legislation that would legalize recreational pot by July 1, 2018. Meanwhile, eight states in the U.S. have legalized recreational marijuana since Nov. 2012, and 29 states overall have given the green light to medical cannabis since 1996. Between consumer favorability and the need by select states to generate tax revenue, weed’s expansion opportunities are aplenty.
Two marijuana stocks that stand out this earnings season
Yet, earnings season brings a grim reality to the forefront for many investors: Marijuana stocks are mostly money losers. Despite this rapid growth rate, the industry is still highly fragmented and filled with small businesses. Also, regulations keep most marijuana-based businesses from thriving. The results are often lofty valuations and steep losses.
Despite many marijuana stocks reporting a loss in their latest quarterly results, two stood out for their impressive sales growth, positive EBITDA, and improved operating efficiency. Not surprisingly, they’re also competitors to one another.
