Big Upside Ahead for MariMed Stock?
If you are looking for a pot stock that has the potential to shoot through the roof, MariMed Inc (OTCMKTS:MRMD) deserves your attention.
MariMed is a vertically integrated multi-state operator headquartered in Norwood, Massachusetts. MariMed stock trades over the counter under the ticker symbol “MRMD” and has a market capitalization of around $200.0 million.
In other words, this company does not seem to be a big player in the cannabis industry.
However, when it comes to growing its business, this small cannabis company might have an upper hand over the big ones.
Just take a look at MariMed’s latest earnings report and you’ll see what I mean.
The company last reported earnings on August 12. It showed that, in the second quarter of this year, MariMed generated $25.7 million in revenue. (Source: “MariMed Inc. Reports Record Q2 2019 Results; Revenue Up 774% to $25.7 Million, Net Income of $4.7 Million,” MariMed Inc, August 12, 2019.)
Compared to the company’s $2.9 million of revenue in the second quarter of 2018, that’s a year-over-year top-line growth rate of 774%!
Of course, if you dig a little deeper, you’d see that the bulk of that massive revenue increase was due to the sale of hemp seeds.
But here’s the thing: even if you take away that part, you’d see that revenue from the company’s cannabis business still grew 24.5% year-over-year.
During the quarter, MariMed earned a gross profit of $8.9 million. Again, this represented a substantial improvement because, in the year-ago period, its gross profit was $2.0 million.
Here’s the best part: while many other pot companies—including some of the industry heavyweights—are still reporting losses quarter after quarter, MariMed Inc managed to turn a profit at the bottom line.
In the second quarter of 2019, the company earned a net income of $4.7 million. To put that in perspective, MariMed incurred a net loss of $393,000 in the year ago quarter.
Of course, those are growth rates that the company has already achieved, and past performance does not guarantee future results.
Things to Look Forward to at MariMed Inc
The good news is, going forward, this pot stock still has quite a few things going for it.
For instance, last month, MariMed announced that its hemp division has signed an exclusive agreement with one of the largest distributors in the Northeast United States. (Source: “MariMed Hemp Signs Exclusive Agreement with Major Beverage Distributor to Market its CBD Brands in Rhode Island and Connecticut,” MariMed Inc, September 25, 2019.)
Under the agreement, the company’s cannabidiol (CBD) products will be placed on the shelves of liquor stores, supermarkets, and other retailers in Rhode Island and Connecticut.
Meanwhile, MariMed is the largest shareholder of GenCanna Global Inc, a vertically integrated agriculture-technology company that specializes in the production of CBD from hemp.
And that investment could turn out to be very fruitful, as GenCanna has chosen Goldman Sachs & Co. LLC as its financial advisor to pursue a possible initial public offering. (Source: “GenCanna Global Engages Goldman Sachs as a Financial Advisor,” Business Wire, September 23, 2019.)
The latest piece of good news came on October 21, when MariMed announced that it has acquired two medical cannabis dispensaries in the state of Illinois. (Source: “MariMed Consolidation Continues with Acquisition of Illinois Cannabis Businesses,” MariMed Inc, October 21, 2019.)
As a result, the company will be able to report the operational results of these two dispensaries in its consolidated financial statements effective October 1.
That means the numbers in the company’s future earnings reports could get a solid boost.
And that’s not all. Illinois legalized recreational marijuana in June, with the law going into effect on January 1, 2020. Meanwhile, recreational pot licenses in the state will be issued with priority given to medical marijuana license holders.
As a result of that, MariMed expects to operate the two newly acquired locations as medical and recreational dispensaries.
At the same time, the company plans to open two new recreational cannabis dispensaries in Illinois, bringing its total number of dispensaries in the state to four.
“The completion of this acquisition is a significant step forward in the implementation of our acquisition and roll-up strategy,” said MariMed’s Chief Executive Officer Bob Fireman.
“The ownership of dispensaries in conjunction with Illinois’ legalization of cannabis for adult use should significantly enhance the revenues of these facilities.” (Source: Ibid.)
MariMed Inc (OTCMKTS:MRMD) Stock Chart
Chart courtesy of StockCharts.com
Looking at the above MariMed Inc stock chart, it’s easy to see that its shares haven’t exactly been hot commodities this year.
And this shouldn’t come as a surprise. Pot stocks had a serious sell-off in the past few months, and MRMD stock was one of the beaten-down tickers.
It doesn’t help that trade disputes and geopolitical frictions seem to be driving the market recently. All that uncertainty has made investors more risk-averse, meaning they probably want to stay away from volatile industries like pot.
Still, as we saw earlier, despite the share price downturn, MariMed stock’s growth theme has remained rather intact.
Therefore, once market uncertainty resolves and sentiment starts to turn bullish toward the marijuana industry, MRMD stock could see much better days ahead.