Before and after the passing of The Cannabis Act, Canada dominated marijuana stocks news, and rightfully so. Becoming the first industrialized nation to legalize recreational marijuana is a historical motion with the potential to assist other developed nations to loosen up their criminalization of cannabis. Canada stands to add $5 billion in annual marijuana sales which has greatly excited growers, suppliers, and, of course, investors.
While Canada marijuana stocks news eats up the spotlight, there are connections to the States which cannot be ignored when looking at stocks to buy now.
Even though the market expansion for Canada is predicted to be huge, the annual cannabis sales of one American state still outrun these predictions.
California voted 57% in favor for Prop 64 to legalize recreational marijuana. California is the fifth largest GDP economy in the world – bigger than all of Canada. The sales from pre-approved, licensed dispensaries of adult recreational weed in the Golden State are anticipated to possibly exceed $5 billion next year.
In spite of the Feds trying to break in on the use of what is still a Schedule I drug in America, the good times in California continue to roll with a market opportunity to surpass the profitability of the legal Canadian market. It’s strange to find the focus on cannabis stocks seems to drift away from California in light of this information.
Marijuana businesses in the United States continue to face complications where other major stocks companies are unaffected.
Weed companies operating in America do not have access to legitimate banking services and the major branches are still concerned about associating with what would be considered criminal activity. If the the scheduling of marijuana were adjusted, the stocks for marijuana companies would get a bigger boost. Due to US Tax Code 280E, marijuana businesses are not eligible for traditional business deductions and Uncle Sam has no problem, no matter what they’re selling, taking their money out in high income tax rates.
Nonetheless, the California market appears to stand strong in the face of these obstacles.
One marijuana stock with a large focus on the California market is MedMen Enteprises (NASDAQOTH:MMNFF).
MedMen has a broad reach as the largest American cannabis initial public offering in all of Canadian history. With operations in New York and Nevada, the company smartly has eight locations in Southern California (four of which are located in LA). MedMen sells high quality weed products at American dispensaries.
A partnership with Canadian brand Cronos Group (NASDAQ: CRON) has propelled the company into the modern marijuana market freeing up capital from its recent IPO to expand. With this expansion effort will inevitably come a period of intense outflow payments; $43 million was spent during the same six-month time frame when $8.4 million was collected from sales income. However, the personality of the MedMen brand works to debunk stereotypical perceptions of marijuana use. This choice in branding may offer the company the edge it will need to survive bumps in the market during times of recession.
While it could take time to see profitability from this company, its selection in focusing on the California market as well as its branding smarts may make it a stock to watch over the next few years.
The Canadian marijuana stock company CannaRoyalty (NASDAQOTH:CNNRF) has invested heavily in the potential of the California market.
CannaRoyalty has a presence in six American States with the laser focus shining on California in the hopes of becoming the Golden State’s top demand distributor (it’s going to be a steep competition).
Considering few distributors function as middlemen in the industry, CannaRoyalty may have a unique advantage. The CannaRoyalty company specializes in equity and debt financing for growers. They earn a royalty on the net sales of products from marijuana businesses looking to expand. Additionally, they wholly own 10 subsidiaries which, when combined with business practices, the company needn’t be concerned about whether or not a few of the businesses they help tank.
While CannaRoyalty touts more than doubling sales during the first quarter last year, their per-share net loss rose seemingly in tandem to 0.10 Canadian dollars. It might not be a no-brainer buy at the moment, but, this stock to watch has potential in the coming years.
Underdog marijuana stock company Sunniva (NASDAQOTH:SNNVF) may have everything going for it to include a concentration on the California market and a supply deal with a big name cannabis company.
Sunniva is a North American grower with a lot of attention paid to their construction project in the works of a 489,000 square feet greenhouse campus in Cathedral City, California (complete with on-site dispensary). Wisely, the company has in place a two year supply agreement with Canadian cannabis giant Canopy Growth Corporation (NYSE:CGC) permitting the purchase of up to 90,000 kilograms of Sunniva’s wholesale production during the period of time established in the agreement.
The company just added plans for an extraction facility last month which may turn out to be a wise investment. Dried cannabis products are subject to commoditization in a way extracts are not.
These are several smart stocks to watch for marijuana businesses who are wisely drawing their attention to the California market.
Continuing to keep an eye on legalization efforts, diversified business plans, and strategic mergers will benefit any new investor hoping to ride the green wave.