Even in 2020, the cannabis industry is in its infancy. From the early 2010s up to today, dozens of enterprises battled fiercely for market share. Some still struggle to gain a foothold, but a select few have surged to the top. These firms have found success in this cutthroat niche, building market caps worth billions of dollars.
Thanks to their market value, most observers consider these companies to be industry leaders. On the surface, it’s hard to argue that point – effectively, investors are voting with their wallet. By looking at a company’s market cap, you can see how many investor votes – or dollar bills – have been cast in support of the company’s mission.
However, market caps aren’t everything. If they were, Bre-X, a fraudulent gold mining company worth 3 billion CAD in 1996, would still be around today.
Today, we’ll be looking at popular cannabis stocks by market cap. Are they worth as much as investors think they are? Below, we’ll provide detailed analysis.
Canopy Growth Corporation (NYSE:CGC)
Of all the companies on this list, Canopy Growth is the runaway leader when it comes to market capitalization. As of today, CGC has a market cap of just under 6 billion USD. If you’re new to the cannabis space, this valuation may make sense to you. After all, this firm records the highest revenue figures in the industry by far. In 2019, they earned 201 million USD. Their latest data looks even better – in Q1 2020, they brought in 80 million USD for a stunning 67.1% YoY increase.
In the past, CGC has attracted criticism for being overvalued – much of it warranted. First, Bill Newlands, CEO of Constellation Brands (who owns more than a third of CGC), had wildly optimistic revenue targets. Last year, he expressed the opinion that Canopy could hit 1 billion USD net revenue in the short-term. As of now, CGC pulls in 200 million USD net revenue annually. Canada-wide cannabis sales would need to triple for Canopy to reach that target.
As it happened, reality was less amenable to Mr. Newlands’s goals. An oversupply of cannabis, paired with disappointing sales, tanked the entire industry in 2019. In April 2019, CGC’s market cap sat just below 19 billion USD before contracting two-thirds to where it sits today.
And yet, in recent days, sites like this covering financial news have been bullish on CGC. Are they crazy? Perhaps not – it appears the worst of the cannabis crunch is behind us. Here’s why – in 2019, Canada approved the second phase of their cannabis legalization plan. This phases legalized edibles, which hold much greater upside potential than oils/dried flower. Curious consumers may shy away from smoking cannabis or trying to make edibles. However, they’ll gladly buy CBD/THC-infused chocolates, drinks, candies, etc.
Meanwhile, in America, eleven more states are on track to legalize cannabis in 2020. In Mexico, the Supreme Court effectively legalized marijuana with the bang of a gavel in 2019. As the biggest company in the industry, CGC’s market cap is poised to increase in the short/medium term.
Cronos Group (NASDAQ:CRON)
The Cronos Group is a firm that engages in cannabinoid research. They also sell recreational cannabis, medicinal cannabis, and hemp-derived CBD products through various brands like Peace Naturals, Cove, Spinach, and Lord Jones.
As of June 2020, CRON had amassed a market capitalization of around 2.1 billion USD. Looking at revenue figures over the past few years, it appears they deserve that lofty valuation. In 2019, the Cronos Group made 31.5 million USD in sales – a stunning 100.6% increase YoY. In 2018, they nearly quadrupled their results from the year before.
In short, CRON is on fire – from a revenue standpoint, at least. However, its stock, which soared to an all-time high of just under 22 USD in March 2019, has tanked to 6 USD today. Two big disappointments are behind its fall. Firstly, the Cronos Group went on a spending spree in 2019 – with Lord Jones, a brand of CBD-infused products, being one of their acquisitions. Shortly after, the FDA clamped down on CBD-infused products. Then, later that year, the vaping health crisis hit. Cronos was poised to make a move into that space – until that profit centre, well, evaporated.
Will CRON’s market cap grow over the next year, or will it continue to leak cash? We’re optimistic growth will resume. In addition to improving market conditions for Cronos’s existing products, this company is making yet another move. Right now, they are working with Gingko Bioworks to produce biosynthetic cannabis. If things work out, they’ll be able to produce cannabinoids in the lab rather than in a grow-op. By doing things this way, Cronos says they’ll create purer cannabinoids. Achieving this will allow them to create and sell derivative cannabis products, or supply cannabinoids to pharma companies.
Green Thumb Industries (OTCMKTS:GTBIF)
Green Thumb Industries produces several lines of retail cannabis products. These brands include Beboe, Dr. Solomon’s, and The Feel. They are also opening retail outlets in legal recreational states like Nevada and Pennsylvania. In 2019, this Chicago-based firm recorded 216 million USD in revenue. That’s a stunning 246.3% increase YoY.
Their recent track record has given GTBIF a sizable market cap of just over 2 billion USD. However, is it representative of Green Thumb’s actual, intrinsic value? It’s roughly on target. Unlike many cannabis stocks, GTBIF hasn’t been overhyped. This equity is rare in that over its lifetime – COVID crash excepted – its price has remained relatively stable. In fact, it’s worth more now (~10 USD) than it was on the day of their IPO (7.97 USD).
Right now, GTBIF has dedicated itself to aggressive growth. They are actively opening retail outlets across America. With eleven states considering legalization, there may be more territories to conquer soon. COVID is a wildcard, though – lockdowns and quarantines could provide sales growth from bored consumers. However, if a second wave doesn’t cause higher sales to materialize, and high unemployment persists, it could put pressure on their meagre cash reserves.
However, given past performance, we think GTBIF is a favorite to increase their market cap over the next year.
Trulieve Cannabis (OTCMKTS:TCNNF)
Trulieve Cannabis is a medical cannabis company headquartered in the state of Florida. They produce medical cannabis products and operate dispensaries where they sell said products. In all, they have over 400 different SKUs which they sell at 49 locations across Florida. They also run a delivery fleet, which allows them to sell product to housebound customers.
In 2019, they generated over 178 million USD in revenue – an exciting 146% jump over the previous financial year. At press time, they reported a market cap of 1.35 billion USD. Is it indicative of Trulieve’s current value and potential upside?
We believe so. TCNNF, like Green Thumb, is not a hyped entity. In its two years of existence, this stock has avoided wild swings, trading mostly in the 8-12 USD range. Rather than sell a pipe dream to gullible investors, they continue to pursue expansion plans at a reasonable pace. They have established demand for their products in their home base of Florida. As they do the same in other legal jurisdictions, we’re confident the value of this company will continue to grow sustainably.
Aphria Inc. (TSE:APHA)
Aphria is a medical cannabis company based in Leamington, Ontario, Canada. Best known for being the “Greenhouse Capital of Canada,” it is an apt place for a marijuana firm. At their facility, they produce dried flower, oils, e-cartridges, capsules, and other medicinal cannabis products.
Growth in revenue for this firm has been exploding. In Q1 2020, which ended in August 2019 for Aphria, they recorded revenues of 126.1 million USD – a mind-bending 849% YoY increase. Additionally, Aphria also posted a gross profit of 15 million CAD on cannabis sales in the last fiscal year. A rare feat, given the current state of the industry. As time wears on, the pace of growth will slow. But still, these are results any firm would be proud to report.
Right now, Aphria has a market cap of around 1.14 billion USD. Will that valuation increase over the next year? We think it will. Given APHA’s reliable results, its stock price of about 6 CAD makes it a bargain. Don’t be surprised if investors start scooping it up soon. When they do, watch as APHA’s market cap rises to reflect its true value.