Why U.S. Pot Stocks Are Seeing Their Revenues Explode

Are U.S. Marijuana Stocks Better Than Canadian Marijuana Stocks?

If you examine the marijuana industry through the lens of U.S. pot stocks vs. Canadian pot stocks, it’s easy to see which side is winning.

U.S. marijuana stocks are way ahead. They’ve been seeing impressive growth while Canadian marijuana stocks have slowed. And, more importantly, American marijuana companies have seen explosions in revenue.

Of the handful of marijuana stocks that are set to crest 10-figure annual revenues (over $1.0 billion), all of them are in the U.S.

There is, of course, one of the top marijuana stocks—if not the top marijuana stock: Curaleaf Holdings Inc (CNSX:CURA, OTCMKTS:CURLF). Curaleaf stock is definitely worth watching.

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Then there’s Cresco Labs Inc (CNSX:CL, OTCMKTS:CRLBF).

Reporting revenue of $178.4 million for the first quarter of 2021, Cresco isn’t quite on pace to crest $1.0 billion in 2021 (though $178.4 million is still impressive). (Source: “Cresco Labs Announces First Quarter 2021 Financial Results Under U.S. GAAP,” Cresco Labs Inc, May 27, 2021.)

And while Cresco only managed a 10% gain in revenue quarter-over-quarter, it did show a massive 168% gain year-over-year. In other words, massive revenue gains aren’t out of the ordinary for Cresco Labs stock.

What’s more, the company has been making moves to make that $1.0-billion milestone more attainable.

Cresco recently expanded into Pennsylvania with a fourth dispensary opening in late June (marking Cresco’s 33rd operating U.S. store). (Source: “Cresco Labs Announces Opening of Sunnyside Philadelphia, Its Fourth Dispensary in Pennsylvania and 33rd Operating U.S. Store,” Cresco Labs Inc, June 21, 2021.)

Trulieve Cannabis Corp (CNSX:TRUL, OTCMKTS:TCNNF) is closer to the $1.0-billion revenue mark compared to Cresco.

Trulieve reported revenue of about $193.8 million for Q1 2021, a 15% jump from the previous quarter. (Source: “Trulieve Reports Record First Quarter 2021 Revenue of $193.8M, Net Income of $30.1M and Adjusted EBITDA of $90.8M,” Trulieve Cannabis Corp, May 13, 2021.)

The company also made moves to expand, recently acquiring Harvest Health & Recreation Inc (CNSX:HARV, OTCMKTS:HRVSF). Harvest Health generated about $88.8 million in revenue for Trulieve in Q1 2021.

Even without accounting for growth, the newly merged company is almost certain to crest the $1.0-billion revenue horizon in 2021.

And there’s every reason to expect that Trulieve stock hasn’t stopped growing.

The company also recently acquired a licensed recreational pot dispensary from Nature’s Remedy of Massachusetts, Inc. in Worcester, MA. (Source: “Trulieve Completes Acquisition of Marijuana Retail License for Dispensary Location in Worcester, Massachusetts,” Cannabis Investing News, June 30, 2021.)

Moreover, Trulieve recently opened a dispensary in Central Florida. (Source: “Trulieve Expands Access to Medical Cannabis in Central Florida With New Winter Park Location,” Trulieve Cannabis Corp, June 23, 2021.)

I love to see expansionist moves like this. After all, as pot companies show financial gains, it inevitably spurs gains in their stock prices. The best way for a company to grow its revenue in the marijuana business is to expand its customer base to the myriad untapped markets, more of which open every month due to U.S. state-by-state marijuana legalization.

Chart courtesy of StockCharts.com

So what accounts for U.S. pot companies showing such promising revenues while Canadian competitors remain relatively stagnant revenue-wise?

The main reason has to do with market size. While Canada has legalized marijuana nationally and the U.S. still technically maintains federal prohibition against the substance, California alone accounts for a larger and richer market than all of Canada.

And while there’s still tons of room for companies to grow in Canada’s legal pot market (the black market is still thriving, which is eating into potential revenue streams for Canadian marijuana companies), that will take time.

U.S. marijuana companies, by contrast, have opportunities galore to expand into new markets with each passing month. Every new state that legalizes marijuana offers potentially dozens of millions of new customers.

And due to the federal prohibition and the restrictions it puts on non-U.S.-based marijuana companies, there’s essentially a golden opportunity for U.S. pot stocks because their competition is artificially limited.

Now, that doesn’t mean Canadian pot stocks are doomed. Far from it. Instead, it simply means that Canadian pot companies have to find other ways to expand.

Global markets outside of Canada and the U.S. present great opportunities.

There’s also room to expand within the Canadian cannabis market with new products or cheaper marijuana that can help displace the black market.

But the real surge is likely to come when we see federal U.S. marijuana legalization. With that, Canadian marijuana stocks will have the ability to access lucrative markets that have long been closed off to them.

And with their established infrastructure, they should be able to quickly take advantage of this new opening, even if U.S. marijuana stocks will have had a years-long head start by then.

This, however, may actually play out in favor of Canadian pot stocks in the long term. They could end up seeing larger revenue surges compared to U.S. pot stocks when federal U.S. legalization arrives.

Furthermore, a simple acquisition after American marijuana legalization is enacted could send share prices soaring as Canadian companies access the new market. With that in mind, some Canadian marijuana stocks have already set up terms for deals post-legalization.

Analyst Take

While U.S. marijuana stocks are where I’d focus my attention if I were looking for large, fast gains, I believe that both U.S. and Canadian pot stocks have the ability to see massive growth in the coming years.

U.S. pot stocks may hold the revenue advantage now, but when the U.S. cannabis market fully opens up, that may reveal Canadian marijuana stocks as the true winners.