The marijuana industry’s prospects in the United States have never been better and stocks in the space are attracting the attention of analysts and investors. According to a Grand View Research report, the global legal marijuana market is expected to expand at a CAGR of 14.3% between 2021 to 2028.
Due to the increasing legalization of cannabis for recreational purposes and growing demand for medicinal marijuana for treating various ailments, cannabis sales are expected to increase this year and beyond. The cannabis market thus presents a huge opportunity for top cannabis players such as Harvest Health & Recreation Inc. (HRVSF) and Akerna Corp. (KERN) because they are continuously increasing their capacity and dispensaries in key states and high-growth markets.
With Governors of many states pushing for federal decriminalization of marijuana, Wall Street analysts believe these two cannabis stocks will gain significantly in the near term.
Harvest Health & Recreation Inc. (HRVSF)
Based in Arizona, HRVSF is engaged in the cultivation, processing, and selling of cannabis in the United States. It offers cannabis oil, capsules, tinctures, and cannabis product edibles under the Roll One, Modern Flower, Alchemy and CBX Sciences brands, among others. The company also operates retail dispensaries that sell cannabis products to patients and other customers.
This month , HRVSF opened a new medical dispensary in Whitehall, Pa., to serve patients with its quality products. It marks the company’s ninth location in Pennsylvania’s fast growing medical marijuana market. In February, the company completed the divestiture of its two medical marijuana dispensaries in North Dakota as part of its strategic plan to allocate resources in core markets to enhance its growth opportunities.
HRVSF’s total revenue increased 84.9% year-over-year to $69.9 million in the fourth quarter, ended December 31 Its gross profit grew 88.6% from the year-ago value to $31.3 million, while its retail revenue rose 107.9% year-over-year to $52.4 million over this period. The company’s gross margin in the fourth quarter was 44.8%, compared to 43.8% in the fourth quarter of 2019.
HRVSF’s consensus EPS estimate for fiscal 2021 represents a 143.8% improvement year-over-year. The consensus revenue estimate of $378.07 million for the current year represents a 63.3% increase from the same period last year. The stock has gained 244% over the past year.
Of four Wall Street analysts that provided ratings for the stock, three have rated it “Buy.” Closing yesterday’s trading session at $3.17, the consensus price target of $5.73 represents a potential upside of 81%.
Akerna Corp. (KERN)
Founded in 2010, Colorado-based KERN is a technology company that offers MJ Platform, an enterprise resource planning system to the cannabis industry, and Leaf Data Systems, a tracking system designed for government agencies. The company also offers a seed-to-sale platform that enables cultivators to track and report various stages of their cannabis growing operations.
In March 2021, KERN signed an agreement to acquire Viridian Sciences, a cannabis business management software system. The strategic acquisition should establish KERN as the only cannabis-compliant SAP Business One offering and enhance its business model.
Last month, KERN’s MJ Platform connector v1.0 received SAP certification as integrated with SAP NetWeaver. This new integration should enable the company to provide comprehensive business solutions to its customers and significantly increase its offerings.
KERN’s total revenue increased 24% year-over-year to $4.1 million in the fourth quarter, ended December 31, 2020, while its software revenue increased 38% from its year-ago value to $3.4 million. Its gross profit grew 60% from the prior-year quarter to $2.7 million. The company generated total cash of $17.8 million as of December 31, 2020.
Analysts expect KERN’s EPS to improve 55.8% year-over-year for the current quarter, ending March 31. And its consensus revenue estimate of $4.71 million for the next quarter, ending June 30, 2021, represents a 66.5% rise on a year-over-year basis.
Wall Street analysts are extremely bullish on KERN. The consensus price target of $10.50 represents a 124.4% increase from the last closing price of $4.68.
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HRVSF shares were trading at $3.16 per share on Wednesday morning, down $0.00 (-0.16%). Year-to-date, HRVSF has gained 46.30%, versus a 6.48% 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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