The cannabis industry is comprised of legal cultivators and producers of cannabis. The industry was previously inhibited by regulatory constraints, but legalization in various markets have strengthened the industry.
The industry exhibits solid growth prospects for the long term due to increasing use of cannabis for medical and recreational purposes.
The companies within the cannabis ecosystem have displayed poor performance over the past year, as evident by the ETFMG Alternative Harvest ETF’s (MJ) 50% decline over this period. However, with the economy gradually returning to normal, the rest of 2020 should see continued interest in cannabis.
Within the industry, Arena Pharmaceuticals, Inc. (ARNA) and Innovative Industrial Properties, Inc. (IIPR) separate themselves from the pack with a stronger recovery and could be viable investment options now.
Arena Pharmaceuticals, Inc. (ARNA)
ARNA is a biopharmaceutical company with a market cap of $3.24 billion. The stock has returned more than 95% since its March lows.
ARNA’s Olorinab (APD371) is an oral full agonist of cannabinoid receptor 2 candidate with an initial focus on visceral pain associated with gastrointestinal disorders. It is currently going through Phase 2b trial in abdominal pain associated with irritable bowel syndrome, and the results are expected in the first quarter of next year.
As of June 30, 2020, ARNA had cash, cash equivalents, and marketable securities of $1.3 billion compared to $1 billion at the end of the first quarter. Nine out of Nine Wall Street analysts have a ‘Buy’ rating on the stock. ARNA has an average price target of $80.25, which is 24.6% higher than the current price.
How does ARNA stack up for the POWR Ratings?
A for Peer Grade
B for Trade Grade
B for Buy & Hold Grade
B for Industry Rank
B for Overall POWR Rating
The stock is also ranked #31 out of 343 stocks in the Biotech industry.
Innovative Industrial Properties, Inc. (IIPR)
IIPR focuses on the development, acquisition, and disposition of industrial facilities leased to tenants in the medical use cannabis industry. As of August 5, 2020, IIPR has committed to invest approximately $1.1 billion through tenant improvement allowances and construction funding commitments.
In the second quarter, total revenues increased by 183%, and net income available to common stockholders increased 322% year over year. IIPR has gained more than 170% since hitting its 52-week low in mid-March due to the overall dip in the market.
The market expects the company to report EPS of $0.83 for the quarter ending September 2020, which represents 50.9% growth over the year-ago number. IIPR pays an annual dividend of $4.24, which yields 4%. Four out of Four Wall Street analysts have a ‘Buy’ rating on the stock. IIPR has an average price target of $114.75, which is 7.2% higher than its current price.
It’s no surprise that IIPR is rated a Strong Buy in our POWR Ratings system. It also has an A for Trade Grade and Buy & Hold Grade, and a B for Peer Grade and Industry Rank. In the 21-stock REITs-Industrial industry, it is ranked #8.
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ARNA shares rose $1.37 (+2.12%) in after-hours trading Thursday. Year-to-date, ARNA has gained 42.29%, versus a 4.94% rise in the benchmark S&P 500 index during the same period.
About the Author: Anmol Suratkal
Anmol began his career as a financial writer and evolved into an investment analyst and journalist with a special interest in risky instruments. He specializes in analyzing financial data and writes insightful articles to help investors generate solid long-term returns. More...
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