ZDPY Stock Might Not Be a Penny Stock Much Longer
Zoned Properties Inc (OTCMKTS:ZDPY) is an overlooked marijuana stock that has been quietly trouncing the broader market.
Best of all, it’s an ancillary pot stock, which means the company doesn’t actually grow cannabis. This makes it a great option for investors who are wary of investing directly in the marijuana industry.
As of this writing, Zoned Properties stock is up by:
- 54% over the last three months
- 110% year-to-date
- 165% year-over-year
Those are spectacular gains, no matter how you look at them.
Despite these big moves, you may not have heard of ZDPY stock because it’s a penny stock. As of this writing, Zoned Properties stock is changing hands at $0.90 per share.
And we know what Wall Street thinks of penny stocks, that they’re shady equities that are penny stocks for a reason.
That logic doesn’t hold true for Zoned Properties Inc, though. The Arizona-based company has been reporting double-digit revenue growth and is profitable. Moreover, it has a history of positive cash flow and income from operations.
Chart courtesy of StockCharts.com
About Zoned Properties Inc
Zoned Properties is a real estate development firm that helps cannabis companies navigate the highly regulated, confusing world of legal marijuana. It’s a niche field that Zoned Properties has been cornering. (Source: “Investor Presentation: August 2021,” Zoned Properties Inc, last accessed October 13, 2021.)
If you thought doing your taxes was confusing, try growing legal cannabis. In the U.S., the emerging marijuana industry is highly regulated and primarily controlled by local zoning and permitting regulations. There are roughly 39,500 local governing bodies that control where a regulated cannabis project can operate.
There are two primary ways in which a company can profit from marijuana real estate.
The first is through capital financing, which is typically done by a real estate investment trust (REIT) like Innovative Industrial Properties Inc (NYSE:IIPR). A REIT acts as a bank in exchange for debt or rent. Or, in the case of Innovative Industrial Properties, it buys property from cannabis companies and leases it back to them.
The second way to profit from cannabis real estate is to provide services. This is what Zoned Properties Inc does. The company provides advisory, brokerage, franchising, and property technology data services.
Essentially, it provides all the services a cannabis company needs to develop real estate projects.
The joy of operating as a “quasi-REIT” is that Zoned Properties Inc can reinvest more of its capital into its operations and not be restricted by many of the regulations that REITS have to follow—namely, the requirement to return the vast majority of their earnings to investors as dividends.
Zoned Properties Inc has more than 15 years of program development experience and six years of direct cannabis business experience. It has advised on more than 100 projects in the regulated marijuana industry.
Big Expansion of Cultivation Facility in Arizona
In August, Zoned Properties Inc announced an amendment to the lease agreement with a tenant related to its cultivation facility in Chino Valley, AZ. The move significantly increases Zoned Properties’ portfolio rental revenue and cash flow. (Source: “Zoned Properties Announces Completion of $8 Million Expansion at Its Chino Valley Cultivation Facility,” Business Wire, August 24, 2021.)
To date, the tenant has invested more than $8.0 million in the facility. The tenant continues to maintain the master rights to the property and facilities through the remainder of the lease agreement.
Effective September 1, the operational area of the Chino Valley facility increased from 40,000 to 67,512 square feet, with the new base rental payments increasing by 68% from $32,800 to $55,195 per month.
Upon completion of the phase one expansion, the annual base rental payments will increase by 143% from $393,600 to $957,550.
Bryan McLaren, Zoned Properties Inc’s CEO, commented, “The increasing demand for regulated marijuana cultivation space and consumer products in Arizona has gone far beyond initial projections as the result of the recently approved and implemented adult-use marijuana program.” (Source: Ibid.)
He continued, “Industry experts are estimating consumer demand in Arizona could increase above $1 Billion in the next few years, which will require increased cultivation cap.”
Strong Q2 Results
For the second quarter ended June 30, Zoned Properties Inc announced that its revenue increased by 83% year-over-year to $550,064. (Source: “Zoned Properties Reports Second Quarter 2021 Financial Results,” Business Wire, August 12, 2021.)
The company’s net income in the second quarter of 2021 was $112,594, or breakeven per diluted share, compared to a net loss of $18,927, or breakeven per diluted share, in the second quarter of 2020.
Zoned Properties Inc’s income from operations came in at $139,653, up from $9,753 in the second quarter of 2020. Its net cash provided by operating activities was $284,408 in the six months ended June 30, 2021, compared to $72,232 in the same prior-year period.
As of June 30, 2021, Zoned Properties Inc had $1.0 million in cash, compared to $699,335 as of December 31, 2020.
“The transition of legacy cannabis operators into a regulated cannabis marketplace has been emerging at a scale and pace beyond what most data projections have accounted for among industry experts,” said McLaren. (Source: Ibid.)
“This is such an exciting time for the regulated cannabis industry as a whole, and our team at Zoned Properties is proud to be working towards evolving commercial real estate development practices for emerging and highly regulated industries.”
Zoned Properties stock is an overlooked U.S. cannabis penny stock, but it might not stay that way for long. The company has been reporting great financial results, securing a healthy amount of capital, and deploying that capital into exciting investment opportunities.
Judging by the doubling of the ZDPY stock price over the last year, investors are confident about Zoned Properties Inc’s long-term prospects.