MariMed Stock Forecast
If you want to build it, MariMed Inc (OTCMKTS:MRMD) will come. A provider of turnkey solutions to cannabis cultivators, producers, and dispensaries, MariMed stock has—like the broader marijuana sector—been bullish.
Unlike the rest of the sector, which has been bullish since September, MariMed shares have been bullish since the start of 2018. The company entered 2018 trading at $0.79 and hit a 52-week high of $5.80 on October 8—for a gain of 634%.
Can this steady, enviable bull run continue? And if so, what is the MariMed stock forecast for the remainder of the year and into 2019?
MariMed was the best-performing marijuana stock in the first half of 2018. Admittedly, past performance doesn’t portend future gains. That said, no matter how you look at it, MariMed’s long-term outlook remains very bright.
What Is MeriMed?
If MariMed was in precious metals, it’d sell shovels, not mine for gold. In the overly crowded marijuana sector, MariMed has set itself apart from the masses by being a full-service provider for marijuana start-up companies.
It specializes in securing and operating facilities, cultivation and production, dispensaries, layouts, designs, merchandising, sales, and financial planning.
MariMed operates six facilities in four states (Delaware, Illinois, Nevada, and Maryland) and is building two new facilities in Massachusetts, which should be operational by the end of 2018.
This is an important milestone; the cannabis industry in Massachusetts could generate as much as $1.1 billion by 2020. (Source: “Legal marijuana could be a $1.1 billion industry in Mass. by 2020,” Boston Globe, March 27, 2016.)
MariMed has helped its clients secure state-issued marijuana licenses in eight states; has licensed partners or distributors in Rhode Island, Delaware, Nevada, Massachusetts, and Maryland; and has worked with manufacturers in California, Colorado, Arizona, Oregon, Washington, and Maine.
MariMed also markets its own brands of marijuana products. This includes tetrahydrocannabinol (THC)- or cannabidiol (CBD)-infused “Mari Melts,” “Kalm-Corn” microwavable THC popcorn, powdered drink mixes, chewable tablets, and “Betty’s Eddies” fruit chews and berry bombs. (Source: “Licensing,” MariMed Inc, last accessed October 17, 2018.)
U.S. Market Potential for Cannabis
The marijuana spotlight is currently on Canadian cannabis companies. And fair enough, you can now spark one up legally in Canada. But with a population of 36 million, Canada is simply the gateway country.
Other industrialized countries are closely watching to see how legalized recreational marijuana plays out in Canada. It is expected that Europe, with a population of 500 million, will legalize the recreational use of marijuana in a few years.
The United States could legalize recreational-use marijuana within five years. It’s already well on its way.
Medical marijuana is legal in 30 states, with that number expected to grow. And nine states—along with Washington, D.C.—have already legalized the use of recreational weed. Together, they generated revenue of $6.7 billion in 2016. (Source: “Marijuana Sales Totaled $6.7 Billion In 2016,” Forbes, January 3, 2017.)
That number is expected to grow. How do we know?
A record number of Americans (64%) are okay with legalizing weed. This includes 51% of Republicans who support the idea. (Source: “Support for marijuana legalization reaches a record high — and even a majority of Republicans back it,” Business Insider, October 25, 2017.)
What does all that mean? With a population of 36 million (less than the population of California) Canada’s weed market is expected to reach $6.5 billion by 2020. (Source: “Canada’s appetite for legal cannabis could be almost as big as it is for wine, CIBC says,” CBC, May 9, 2018.)
Solid numbers indeed.
But that’s peanuts compared to the market potential in the United States.
By 2020, cannabis sales in the U.S. are expected to generate at least $20.0 billion. By 2022, the medicinal and adult use of recreational weed is projected to hit $22.0 billion—more than three times the estimated size of the Canadian and German markets combined. (Source: “Exclusive: New Report Predicts CBD Market Will Hit $22 Billion by 2022,” Rolling Stone, September 11, 2018.)
And MariMed Inc, with its years of experience working in a highly regulated industry, will be there to help American marijuana companies build their companies.
MariMed Q2 2018 Financials
MariMed has reported solid year-over-year revenue growth every quarter since 2016. On August 15, MariMed announced its financial results for the second quarter ended June 30. The company’s revenue for the period increased 81% year-over-year to $2.9 million. (Source: “MariMed Grows Revenue 81%, Triples Assets Year over Year for Q2 2018,” MariMed Inc, August 15, 2018.)
Earnings before interest, taxes, depreciation, and amortization (EBITDA) increased by 50% to $1.02 million for the quarter, compared to $682,000 for the same prior-year period.
During the quarter, the company’s assets tripled to $45.4 million from $15.4 million on June 30, 2017. MariMed’s cash on hand increased to $5.1 million from $1.3 million on December 31, 2017.
Other second-quarter operational highlights include:
- Raising $10.4 million in the six months ended June 30 to fund operations, facility development, and the expansion of branded licensing
- Acquiring iRollie LLC, which manufactures branded marijuana products and accessories, including custom products and packaging
- Expanding the distribution of its new “Nature’s Heritage Cannabis”-branded strains and products to 45 dispensaries via MariMed-licensed client Kind Therapeutics USA
- Starting to distribute the first harvests of “Tikun Olam”-branded cannabis strains
MariMed Sprout Investment
Subsequent to the end of the second quarter, MariMed announced that it completed the strategic acquisition of Sprout, a customer relationship management and marketing software company for marijuana dispensaries and cannabis brands.
In addition to helping expand its brands into new markets, MariMed plans to grow Sprout’s client base by marketing it to the top marijuana companies and dispensaries in the United States. (Source: “MariMed Completes Strategic Investment in Sprout,” MariMed Inc, September 27, 2018.)
MariMed Inc is one of the best marijuana plays out there. It has a strong foothold in the large U.S. market. And it should capture more of the market share once more states legalize both medicinal and recreational cannabis use.
Wherein many pot stocks have seen their share price enjoy a speculative spike, the MRMD stock price has been steadily rising this year. That’s in part because higher MariMed revenue growth has been reported every quarter since 2016.
Chart courtesy of StockCharts.com
MariMed investors have been enjoying some solid gains all year long. The company’s share price is trading well above its 50-day and 200-day moving averages, showing a solid, continued, upward trend.
Investor interest in MariMed increased in early June and has remained strong. This points to excited buyers. Momentum indicators like the relative strength index (RSI) and the moving average convergence/divergence (MACD) indicator suggest ongoing bullish sentiment.
Although some cannabis investors might worry whether their favorite weed stock can sustain 100%+ gains made over a two-week period, MariMed investors are a little more relaxed.
MariMed’s share price hasn’t been victim to a speculative spike and investor feeding frenzy. Its gains this year have, for the most part, been measured and justified. This bodes well for MariMed investors as we head into 2019.
Some speculate that MariMed could face headwinds in the coming years as the marijuana industry consolidates with big players not needing their professional management services. Should MariMed be a static company, this could certainly happen.
But one thing that every company needs to do to stay competitive is evolve. And that is what MariMed will need to do in the coming years.
While it’s impossible to give a precise MRMD stock prediction for the first half of 2019, a projection in the $8.00–$9.00 range isn’t out of the question. To get there though, it needs to break through $5.80. That said, if MariMed’s share price drops below $3.40, it could fall a lot further before rebounding.