A Hidden Gem for Pot Stock Investors
If you’ve been following the cannabis industry, you’d know that, for many marijuana stocks, 2021 has been somewhat of a roller-coaster ride. Due to the meme stock frenzy in January and early February, many pot stocks shot through the roof. But parabolic runs don’t last forever, and in the last few months, we’ve seen many soaring tickers fall back to Earth.
If you don’t like chasing the hottest sectors, the current price weakness in pot stocks could be an opportunity.
Check out Columbia Care Inc (CNSX:CCHW, OTCMKTS:CCHWF), for instance.
The New York-based multistate operator enjoyed a huge rally in its share price toward the end of 2020. Then Columbia Care stock reached an intraday high of $7.89 on February 10, 2021 and, like many of its peers, started to lose some momentum.
As of this writing, CCHWF stock trades at $4.86 apiece, down by about 38% from its February peak.
Columbia Care Inc (OTCMKTS:CCHWF) Stock Chart
Chart courtesy of StockCharts.com
The thing is, while investor sentiment doesn’t seem very bullish toward Columbia Care stock at the moment, the company’s business remains solid.
CCHWF stock may not be a big ticker, but the company runs vertically integrated cannabis operations at a national scale. The company has 30 cultivation and manufacturing facilities, 92 dispensaries (69 active and 23 in development), and licenses in 18 U.S. jurisdictions and the EU. (Source: “Investor Presentation: May 2021,” Columbia Care Inc, last accessed July 9, 2021.)
In fact, Columbia Care is one of the original medical cannabis providers in the U.S. Today, it’s one of the largest and most experienced multistate marijuana operators in the country, with an addressable market of more than 53% of the American population.
Last year, despite impacts from the COVID-19 pandemic, Columbia Care Inc added 39 dispensaries and approximately 240,000 square feet of indoor cultivation and production space.
The company conducted 1.2 million sales transactions in 2020, with an average dispensary transaction amount of $139.00.
Also in full-year 2020, Columbia Care generated $197.9 million of combined revenue, representing a 151% increase from 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) were negative-$905,000 for the year. Although the amount was negative, it marked a huge improvement from the adjusted EBITDA loss of $47.4 million reported for 2019.
In the first quarter of 2021, the growth momentum continued. In the quarter, Columbia Care generated combined revenues of $92.5 million, which not only represented a 220% increase year-over-year, but also marked a new record for the company. (Source: “Columbia Care Reports Record First Quarter 2021 Results; Reaffirms 2021 Guidance,” Columbia Care Inc, May 17, 2021.)
Notably, 11 of the company’s markets generated positive adjusted EBITDA during the quarter. In particular, Virginia achieved profitability for Columbia Care within 90 days of its first sale.
For the entire company, adjusted EBITDA came in at $10.4 million in the first quarter of 2021. Considering that Columbia Care Inc’s adjusted EBITDA was negative-$9.9 million in the first quarter of 2020, the company achieved a $20.0-million increase year-over-year.
The best, though, is likely yet to come. Management projects that the company will generate combined revenue of $500.0 to $530.0 million and adjusted EBITDA of $95.0 to $105.0 million in full-year 2021.
Given the amounts reported for revenue and adjusted EBITDA in 2020, the guidance range is essentially saying that 2021 will be a year of explosive growth for Columbia Care.
Because cannabis is one of the more volatile sectors, the performance of pot stocks depends on not just fundamentals, but also the market’s appetite for risk. In other words, it’s hard to say when investor sentiment toward Columbia Care stock will turn bullish again.
That being said, Columbia Care Inc runs one of the fastest-growing businesses in the entire legal marijuana sector. So when pot stocks start to regain some investor appeal, I wouldn’t be surprised to see CCHWF stock become one of the top performers.