Despite a topsy-turvy year for the broader market, marijuana stocks were quite the buzz on Wall Street in 2020. Slowly but surely, we've watching cannabis grow into a legitimate industry.
In Canada, the opening of new dispensaries is easing some of the early stage bottlenecks that plagued the pot industry. Meanwhile, in the U.S., a total of 36 states have now given the green light to medical marijuana, 15 of which also allow for adult-use consumption and/or retail sale.
This burgeoning industry has given rise to 10 marijuana stocks with at least a $2 billion valuation. Here's how these industry titans rank as we enter 2021.
1. Canopy Growth: $9.18 billion
As has been the case for years, Canadian licensed producer Canopy Growth (NASDAQ: CGC) is the largest pot stock in the world -- although it's lost its large-cap status. Canopy's mammoth cash pile, courtesy of multiple direct and indirect equity investments from spirits giant Constellation Brands, has been primarily responsible for buoying the company's valuation. On an operating basis, former Constellation CFO and now Canopy CEO David Klein has been working overtime to cut costs. Despite leading the industry in market cap, there's still a lot of work to be done to get this company anywhere near recurring profitability.
2. Curaleaf Holdings: $7.92 billion
Multistate operator (MSO) Curaleaf Holdings (OTC: CURLF) is the unquestioned largest pure-play pot stock in the United States. Curaleaf completed two major acquisitions last year, scooping up Cura Partners, which owned the popular Select brand of cannabis products, and buying privately held MSO Grassroots. Today, Curaleaf has more than 90 operational dispensaries, holds over 130 dispensary licenses, and has a presence in 23 states. Wall Street expects Curaleaf to become the first weed stock to hit $1 billion in annual sales.
3. Green Thumb Industries: $5.21 billion
U.S. MSO Green Thumb Industries (OTC: GTBIF) enters 2020 sporting a market cap north of $5 billion. It has 50 operational dispensaries, but holds enough licenses to open 96 retail locations in 12 states. Green Thumb's success can be attributed to its market selectivity and the fact that two-thirds of its sales are generated from derivatives (edibles, vapes, infused beverages, concentrates, and topicals). Derivatives yield substantially juicier margins than dried cannabis flower, which'll push Green Thumb to recurring profitability before many of its peers.
4. Innovative Industrial Properties: $4.06 billion
Cannabis-focused real estate investment trust (REIT) Innovative Industrial Properties (NYSE: IIPR) enters the new year having topped a $4 billion valuation. Innovative Industrial Properties is the most profitable pure-play pot stock on a per-share basis (say that three times fast) and has aggressively acquired cultivation and processing assets over the past two years. In particular, the lack of cannabis banking reform at the federal level in the U.S. has allowed IIP's sale-leaseback program to shine. Look for 2021 to be another year of exceptional growth.
5. Trulieve Cannabis: $3.71 billion
Whereas IIP is the most profitable marijuana stock on a per-share basis, MSO Trulieve Cannabis (OTC: TCNNF) is the most nominally profitable pot stock. Trulieve's growth is the result of its laser focus on Florida's medical marijuana market. It ended 2020 with 75 operational dispensaries nationwide, 70 of which are in the Sunshine State. Trulieve's statewide saturation has helped the company effectively build up its brand without spending big on marketing, and has allowed it to capture roughly half of the Sunshine State's medical weed market share.
6. GW Pharmaceuticals: $3.39 billion
Even though its management team dislikes being lumped in with marijuana stocks, cannabinoid-focused drug developer GW Pharmaceuticals (NASDAQ: GWPH) will slide in as the sixth-largest pot stock. GW Pharmaceuticals' claim to fame is cannabidiol-based drug Epidiolex, which is approved to treat two rare forms of childhood-onset epilepsy, and had its label expanded in 2020 to also include tuberous sclerosis complex. This year, Wall Street will be looking for the company to turn the corner to recurring profitability on the heels of a 43% increase in year-over-year sales.
7. Cronos Group: $2.47 billion
Aside from Canopy Growth, Cronos Group (NASDAQ: CRON) is the only other Canadian licensed producer to make the list. Like Canopy, Cronos' valuation has been lifted by its substantial cash position. In March 2019, Cronos received $1.8 billion from tobacco behemoth Altria Group in exchange for a 45% stake in the company. The expectation is that this duo will develop and market high-margin vape products throughout Canada. However, Cronos' operating results have, thus far, left a lot to be desired.
8. GrowGeneration: $2.2 billion
Hydroponic and organic gardening store chain GrowGeneration (NASDAQ: GRWG) catapulted its way into the top 10 after a mammoth 881% return in 2020. GrowGen, as the company is known, is operating 36 stores in 11 states, but has plans to expand to 50 stores in 15 states by year's end. This is a company that's seeing high double-digit organic growth as producers look to improve their yield, but has complemented its expansion with nearly a dozen acquisitions since 2014. Following back-to-back years of triple-digit sales growth, Wall Street is looking for GrowGeneration's sales to jump by a more "modest" 54% in 2021.
9. Cresco Labs: $2.13 billion
Surprise! Yet another U.S. MSO makes the list. Cresco Labs (OTC: CRLBF) has 20 operational dispensaries at the moment, 10 of which are located in the limited license state of Illinois. The Land of Lincoln is expected to become a billion-dollar weed market by 2024.
Cresco also has one heck of a budding wholesale business. The company's acquisition of Origin House in January 2020 allowed it to place pot products into more than 575 dispensaries in California, the largest marijuana market in the world. Cresco has a good shot to hit recurring profitability in 2021, followed by $1 billion in annual sales in 2022.
10. Columbia Care: $2 billion
Last but not least, another U.S. MSO, Columbia Care (OTC: CCHWF). Previously known for focusing on medical cannabis and manufacturing, Columbia Care is finding a world of additional opportunity by pivoting to include recreational pot. Columbia Care currently has 76 open dispensaries in 18 states, and is predominantly looking to expand through acquisitions. In September, Columbia Care acquired Colorado's leading vertically integrated cannabis operator, The Green Solution.
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Sean Williams has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Constellation Brands, Cresco Labs Inc., Green Thumb Industries, GrowGeneration, and Innovative Industrial Properties. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.