As 2019 comes to an end, people have been looking for investment ideas for the New Year.
There are uncertainties looming in the distance. Will the trade war between the U.S. and China escalate? Will the growing government debt become a crisis? And how will markets react to the outcome of the 2020 U.S. presidential election?
The neat thing is, no matter what the answers to any of the above questions turn out to be, there is one industry in North America that’s well positioned to boom: pot.
You see, Canada legalized recreational pot in October 2018, and now the country has also legalized cannabis-derivative products such as edibles. In the U.S., marijuana is legal in 11 states for recreational use, and it’s legal for medical use in 33 states.
For those looking to capitalize on the booming cannabis industry in 2020, one company should be near the top of their watch list: National Access Cannabis Corp (OTCMKTS:NACNF, CVE:META), which operates under the business name Meta Growth.
National Access Cannabis Corp (Meta Growth)
Headquartered in Toronto, Ontario, Canada, National Access Cannabis Corp has a network of recreational pot retail locations under the names “Meta Cannabis Co” and “NewLeaf Cannabis.” (Source: “Investor Presentation December 2019,” National Access Cannabis Corp, last accessed December 24, 2019.)
With a share price of just $0.26, NACNF is one of the lower-priced pot stocks. But the company actually has a solid presence in its operating industry. As a matter of fact, Meta Growth is the largest publicly traded recreational cannabis retailer in Canada by revenue.
As of November, the company had 35 licensed stores in Manitoba, Saskatchewan, and Alberta, and it had plans to open additional locations, including in British Columbia and Ontario.
Business has been growing at this Canadian pot retailer.
In the third quarter of Meta Growth’s fiscal year 2019, which ended May 31, the company generated CA$16.8 million in revenue from its retail cannabis stores. (Source: “National Access Cannabis Generates $17 million in Revenue in Q3 2019. Retail Cannabis Stores Generate $16.8 million in Revenue, and Adjusted EBITDA of $2.3 million,” Cision, July 30, 2019.)
The amount represented a 5.5% increase from its second fiscal quarter.
More impressively, Meta Growth’s retail cannabis stores produced adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) of CA$2.3 million in the reporting quarter, marking a 32.4% increase sequentially.
This allowed the company to deliver an adjusted EBITDA margin of 14% in the third fiscal quarter, representing a sizable expansion from the 11% achieved in the prior fiscal quarter.
In the first year since Canada legalized recreational marijuana, Meta Growth generated more than CA$60.0 million in total retail sales, with a cumulative gross profit margin of 32%. (Source: “National Access Cannabis Corp. Generates Over $60 Million in Retail Sales in the First Year Since Federal Legalization at a Cumulative Gross Margin of 32%(i),” Cision, October 15, 2019.)
A New Catalyst for Meta Growth Stock in 2020
While National Access Cannabis already has an entrenched market position, its presence could get much bigger in 2020.
On December 19, Meta Growth announced that it had entered into an agreement with one of the marijuana retail license lottery winners in Ontario to open a new store in Toronto. (Source: “Meta Growth Announces Toronto Retail Cannabis Store with Cannabis Lottery Winner,” National Access Cannabis Corp, December 19, 2019.)
“With today’s announcement, the newly refined META brand is set to launch in Ontario – a solid first step to spark our expansion across the province,” said Meta Growth’s chief executive officer Mark Goliger.
“This premium real estate location will introduce a high volume of customers to the META brand. Through our agreement with the owner, we plan to make this site one of the top performing stores in the country.”
Note that Ontario is the most populous province in Canada. Therefore, entering this province could be a major opportunity for Meta Growth’s business.
The company has also secured funding that could help it execute its expansion plan. On December 19, National Access Cannabis Corp announced that it would be receiving up to CA$11.0 million in the form of an unsecured loan from Opaskwayak Cree Nation. (Source: “Meta Growth Announces $11 Million Loan Agreement and Deepens Relationship With Opaskwayak Cree Nation,” Cision, December 19, 2019.)
Proceeds from this loan are expected to be put toward building out the company’s Ontario pot retail locations, as well as for working-capital purposes.
And that’s just a small part of the company’s overall growth strategy. Meta Growth plans to have 90 retail stores by the end of 2020.
National Access Cannabis Corp (OTCMKTS:NACNF) Stock Chart
Chart courtesy of StockCharts.com
If National Access Cannabis Corp’s expansion plan works out, it will likely be churning out much bigger numbers from its business a few quarters down the road.
By that time, this low-priced pot stock could be a lot more expensive.