The past few  months have been eventful for the cannabis industry, with several new U.S. states moving to legalize medical and recreational marijuana use. The most recent example is Virginia: As soon as Gov. Ralph Northam signs a bill recently passed by the state’s House and Senate Virginia will  join 15 other states and the District of Columbia that have legalized marijuana for adult recreational use.

Many cash-strapped states, such as Wisconsin and Kansas, are pushing for similar measures with an eye on the potential tax revenues to be had from the legal sale of marijuana products. With Governors citing racial disparities in drug convictions as just one of the reasons to support marijuana legalization, federal reform could also be closer than ever. In essence, these moves could act as major growth catalysts for even the lesser-known cannabis stocks.

While typically it is the  leading cannabis stocks that hog all the attention, we believe relatively smaller stocks, such as Columbia Care Inc.  (CCHWF), Planet 13 Holdings Inc. (PLNHF), 4Front Ventures Corp. (FFNTF), and Acreage Holdings, Inc. (ACRHF), that are currently trading below $10, might now have significant upside. These companies’ continued efforts to capitalize on favorable regulatory tailwinds should position their stocks nicely to generate long-term shareholder value.

Columbia Care Inc.  (CCHWF)

Headquartered in New York, CCHWF markets high-quality cannabis-based health and wellness solutions. It is also a cultivator, manufacturer, and seller of medical and adult use cannabis products and related services. The company operates 80 dispensaries and holds licenses in 15 jurisdictions in the U.S. and the E.U.

Last month, CCHWF raised C$28.98 million in a private placement offering in selected Canadian provinces. The company plans to use the offering’s proceeds for working capital and general corporate purposes.

Also in February, the company received permits from the West Virginia Office of Medical Cannabis for open five medical dispensaries. This will allow CCHWF  to offer its pharmaceutical-grade products to customers s in the cities of Beckley, Fayetteville, Morgantown, St. Albans, and Williamstown.

CCHWF’s combined revenues increased 234% year-over-year to $81.8 million in the fourth quarter, ended December 31. Its adjusted EBITDA grew 124% sequentially to $9.47 million, while its adjusted gross margin rose 1700 basis points year-over-year to 42% over the period. Its  adjusted gross profit increased 465% from its year-ago value to $33.98 million.

A consensus EPS estimate of $0.28 for fiscal 2022 represents a 1300% improvement year-over-year. The consensus revenue estimate of $738.66 million for the next year represents a 48.2% increase from the same period last year. The stock closed yesterday’s trading session at $5.90, gaining 365.6% over the past year.

Planet 13 Holdings Inc. (PLNHF)

Las Vegas-based cannabis retailer PLNHF produces, cultivates and distributes cannabis and cannabis-infused products for the medical and retail cannabis markets in the United States. In addition,  the company operates dispensaries and offers cardholder process navigation services, patient education services, express services, and home delivery services.

This month, PLNHF reported that its unique in-house award-winning brands are now available in 53 dispensaries in Nevada, including the SuperStore. As it continues to see strong demand for its owned brands, this development should provide better access to its customers across Nevada.

Also this month,  PLNHF partnered up with Curaleaf’s Select brand to offer customers a unique shop-in-shop experience in the Las Vegas SuperStore. Because the store will be among the first retailers in the state to offer Select’s newest products, it should elevate PLNHF’s retail presence and enrich its customer experience.

In the third quarter, ended September 30, 2020, PLNHF’ total revenue increased 36.5% year-over-year to $22.8 million. Its gross profit increased 27% from its year-ago value to $12.47 million, while its operating income grew 686.4% year-over-year to $3.64 million. The company’s adjusted ebitda  rose 82.4% year-over-year to $6.2 million over the period.

Analysts expect PLNHF’s revenue for the quarter ending March 31, 2021 to be $25.19 million, representing 50% year-over-year growth. Its  EPS is likely to increase 100% in its  fiscal year 2021. Currently trading at $6.11, the stock gained 633% over the past year.

4Front Ventures Corp. (FFNTF)

Founded in 2011, Arizona-based FFNTF operates licensed cannabis facilities in the United States through Retail, Production, Pure Ratios, and Real Estate segments. The company operates cannabis dispensaries and sells supplies to cannabis producers. It also sells non-TCH products, and imports equipment and supplies for resale.

On March 16, 2021, FFNTF inked an agreement with Innovative Industrial Properties, Inc. to build an up to 558,000 square foot cultivation and production facility in Illinois. Since this new development would mark the largest such facility in the state, FFNTF  will be well positioned to offer its full array of products into the market and emerge as the top cannabis player in the state.

In January, FFNTF received approval from the Brookline, Massachusetts Planning Board to begin the construction of a new mission-branded dispensary. It will serve adult-use customers and is on track to open in the second quarter of this year. The new dispensary should allow the company to meet the robust demand for its products in the state.

During the third quarter, which ended September 30, 2020, FFNTF’s pro forma revenue increased 18% sequentially to $22.3 million. Its IFRS sales rose 25% quarter-over-quarter to $12.4 million. And the  company reported an adjusted ebitda  of $3.7 million over this period.

FFNTF is expected to see  revenue growth of 95% for the period ending December 2021. It closed yesterday’s trading session at $1.20, gaining 417.9% over the past year.

Acreage Holdings, Inc. (ACRHF)

Formerly known as High Street Capital Partners, ACRHF is an investment firm that holds a portfolio of cannabis cultivation, processing and dispensing operations in the United States. The company has quickly evolved to become a leading, vertically integrated multi-state operator after entering the cannabis industry in 2011 with an investment in a Maine license.

In February 2021, ACRHF’s subsidiary, High Street Capital Partners, agreed with Red White and Bloom Brands to sell all the shares of Acreage Florida for $60 million. The agreement also involves the sale of property in Sanderson, Florida. The company intends to use  the cash proceeds to boost its balance sheet and position it for significant long-term growth.

Also last month, ACRHF appointed Steve Goertz to the position of Chief Financial Officer, effective April 2. His 25 years of experience in finance and capital markets and deep expertise in complex transactions should help him lead the company to long term growth.

ACRHF’s reported revenue increased 50% year-over-year to $31.5 million in the fourth quarter, ended December 31, 2020, while its managed entity revenue increased 41% from the year-ago value to $15.7 million. Its gross margin grew 900 basis points year-over-year to 46.1%.

The company’s EPS is expected to grow 97.9% for the period ending December 2021. Analysts expect ACRHF’s revenue to increase 66% in fiscal 2021 and 36% in fiscal 2022. ACRHF’s stock has gained 75.8% year-to-date and is currently trading at $5.45.

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CCHWF shares were trading at $5.80 per share on Thursday morning, down $0.10 (-1.69%). Year-to-date, CCHWF has declined -4.13%, versus a 3.64% rise in the benchmark S&P 500 index during the same period.

About the Author: Imon Ghosh

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...

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