Two Pot Stocks to Watch in 2020
A large number of cannabis stocks experienced strong growth in 2019, with many marijuana companies reporting substantial revenue growth and profitability.
As with any industry, especially one in its infancy, there are going to be some stocks that trounce the broader sector.
Two overlooked pot stocks that investors should keep on their radar are GrowGeneration Corp (NASDAQ:GRWG) and Planet 13 Holdings Inc (OTCMKTS:PLNHF, CNSX:PLTH).
GrowGeneration continues to be one of the cannabis industry’s best-kept secrets. Trading at $4.14 per share as of this writing, GRWG stock is up 75% year-over-year.
Wall Street is providing a 12-month price forecast of $8.00 per share. That represents a 93% increase from its current price.
Keep in mind, Wall Street likes to play it safe. A 12-month stock forecast of $9.50 is entirely reasonable, representing a 129% increase from its current price.
What would propel GrowGeneration stock to those levels in 2020? The company recently reported record third-quarter revenue and profitability, provided a strong outlook, uplisted to the Nasdaq, and has an aggressive acquisition strategy.
Chart courtesy of StockCharts.com
About GrowGeneration Corp
The Denver, Colorado-based GrowGeneration has emerged as the go-to destination for marijuana growers of every size.
The company owns and operates the largest chain of specialty hydroponic and organic gardening centers in the United States. (Source: “Investor Presentation,” GrowGeneration Corp., last accessed December 24, 2019.)
It also operates the online superstore “GrowGen.Pro” (formerly “HeavyGardens”).
GrowGeneration’s customers include individuals who grow a few plants in their own homes and multi-state companies that grow marijuana on an industrial scalee.
GrowGeneration operates a chain of 26 retail stores in nine states: California, Colorado, Maine, Michigan, Nevada, New Hampshire, Oklahoma, Rhode Island, and Washington.
In December, GrowGeneration announced that it purchased the assets of Portland, Oregon-based GrowWorld. (Source: “GrowGeneration Purchases all the Assets of GrowWorld,” GrowGeneration Corp, December 18, 2019.)
At 15,000 square feet, GrowWorld is the largest hydroponics retail operator in the state. Since 2015, GrowWorld has also been the biggest hydroponics store in Portland, with the highest sales volume in the city and the highest revenue of such stores in Oregon’s history.
Record Third-Quarter Revenue & Earnings
In November, GrowGeneration announced the financial results for its third quarter ended September 30. The company announced that its revenue for the period advanced 159% year-over-year to $21.8 million, with same-store sales up 48%. (Source: “GrowGeneration Reports Record Q3 2019 Revenues and Net Income,” GrowGeneration Corp, November 11, 2019.)
The company reported third-quarter net income of $1.0 million, a marked improvement from the third-quarter 2018 net loss of $784,573.
GrowGeneration reported third-quarter 2019 adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) of $2.0 million, compared to an adjusted EBITDA loss of $71,584 in the third quarter of 2018.
At the end of the 2019 third quarter, GrowGeneration had $16.0 million in cash and cash equivalents.
Planet 13 Holdings Inc
Planet 13 is another marijuana stock that had a solid 2019 and looks even stronger in 2020. PLNHF stock advanced approximately 77% year-over-year, with analysts calling for a 12-month price forecast of $3.95, which represents a 98% increase from its current price of $2.00.
As with GrowGeneration, Wall Street’s 12-month share-price forecast may be a little conservative. A 12-month price forecast of $4.25 seems more likely for Planet 13 stock. If it does hit $4.25, that would be a gain of 113% from its current price.
Chart courtesy of StockCharts.com
About Planet 13 Holdings Inc
Planet 13 is a seed-to-sale cannabis company based in Las Vegas. What sets it apart from other vertically integrated marijuana companies is that it also owns the largest legal pot dispensary in the world.
The 112,000-square-foot “Planet 13 Cannabis Entertainment Complex” is near the Las Vegas Strip. (Source: “About,” Planet 13 Holdings, Inc., last accessed December 24, 2019.)
At Planet 13 ‘s superstore, which is open 24/7, consumers can buy the company’s own branded products, which includes vapes, edibles, pre-rolls, and concentrates.
Since opening in November 2018, the superstore has seen its average daily visitor count jump 79% to 3,300, with the average spending amount per customer rise 8.4% year-over-year to $94.48. (Source: “Planet 13 Announces Customer Traffic for October 2019,” Planet 13 Holdings Inc, last accessed December 24, 2019.)
This one retail location accounts for about nine percent of Nevada’s cannabis sales.
And those figures are expected to increase.
In June, the company announced that it will be entering California, the largest marijuana market on the planet. The proposed 40,000-square-foot facility in Santa Anta will be one of the largest weed dispensaries in the world. (Source: “Planet 13 Announces California Entry with Marquee Cannabis Dispensary Complex,” Planet 13 Holdings Inc., June 6, 2019.)
In October, Planet 13 started construction on a restaurant and café in Las Vegas after buying out neighboring businesses. The company will be opening the “Rickety Cricket Café” and the “Purc Coffee Shop,” which will cover 4,500 square feet and seat up to 150 people. (Source: “Planet 13 Restaurant and Café Set to Open,” Cision, October 18, 2019.)
In November, the company was given its final permits to begin production of its 15,000-square-foot customer-facing production facility in Las Vegas. The addition features 115 feet of windows, where customers can watch products being made. (Source: “Planet 13 Production Facility Begins Operations,” Cision, November 1, 2019.)
Outside of Las Vegas, Planet 13 is looking for additional locations where it can replicate its unprecedented success.
Q3 Revenue Advances 241%, Adjusted EBITDA Soars
In November, Planet 13 announced that revenue for its third quarter ended September 30 advanced 241% year-over-year to $16.7 million. (Source: “Planet 13 Announces Third Quarter 2019 Financial Results,” Planet 13 Holdings Inc., November 25, 2019.)
The company reported net income before taxes in the third quarter of 2019 of $300,000, compared a net loss of $0.5 million in the same period of 2018.
Planet 13 also reported a net loss (after taxes) of $1.7 million, compared to a net loss of $0.9 million in the same prior-year period.
Planet 13 reported adjusted EBITDA of $3.4 million, up from $376,611 in the third quarter of 2018.
The company remains well capitalized, with $18.1 million in cash.
2019 was an interesting year for cannabis stocks. With the industry finding its legs, 2020 looks like it will be even more rewarding.
That’s especially true for marijuana stocks like Planet 13 stock and GrowGeneration stock. Both companies have strong operations and aggressive expansion plans. That should help juice their share prices over the coming quarters.