Earnings season for the cannabis industry is well underway and during the last week, several high-profile cannabis companies have reported quarterly financial results. So far, these results have been impressive and have showed strong growth when compared to the same period last year.
Although the quarterly results have showed strong growth on a comparative basis, some companies have reported numbers that were well below expectations and the market has responded negatively to this.
During the last year, the cannabis industry has gained incredible traction as new markets have opened and company valuations have significantly increased as a result of this. We believe that 2019 will be a year where companies need to back up these valuations with results. Due to this belief, we have been focused on companies that have been recording significant growth and that are attractively valued.
We have been closely monitoring the performance of cannabis companies following the release of quarterly financial results and have been noticing interesting trends. Today, we have highlighted 4 cannabis companies that recently reported earnings and believe that these are opportunities that investors should be watching.
1933 Industries: A Cannabis Company to be Watching
Las Vegas is one of the most exciting cannabis markets in the United States and is a market that we have been favorable on. 1933 Industries Inc. (TGIF.CN) (TGIFF) has a first mover advantage when it comes to the Las Vegas cannabis market and has been capitalizing on this burgeoning opportunity.
Earlier this week, 1933 Industries released second quarter financial results and these numbers showed impressive growth on a comparative basis. We are favorable on the improving fundamentals and believe that this is an important trend to be following. The company is well capitalized and reported to have more than $8.8 million in cash and $54 million of total assets as of January 31st.
We have been covering 1933 Industries and believe that this opportunity has been flying under the radar. With a market cap of approx. $150 million, we believe that the market underappreciates this cannabis company. When compared to its peers, the valuation is attractive and believe that this is an important aspect of the story.
One of the reasons why we are favorable on 1933 Industries is due to the ways it has advanced its business. Earlier this month, the company bought out the remaining ownership interests of its Infused MFG. subsidiary and we are favorable on the growth prospects associated with this division of the business.
During the second quarter, Infused generated approx. $2.4 million in revenue and we are favorable on the margins associated with these sales. Earlier this year, 1933 Industries reported that Infused had attained product distribution into 46 states and had established its own distribution to over 600 stores. Infused’s recognized brands are available in over 250 retail stores in California, Nevada, Arizona, and Colorado, with the remainder distributed across the United States.
Another reason why we are favorable on 1933 Industries is due the additions to the management team. When it comes to investing in cannabis businesses, it all starts with the management team and we believe that the recent additions have been significant. With 1933 Industries, we are confident in the management team’s ability to advance the business from here and are to create value for shareholders.
1933 Industries is well capitalized and is almost finished with its expansion. This will result in significantly higher production capacity and will be a major catalyst for the company. 1933 is a company that has significant catalyst for growth and we believe that the market underappreciates this. So far, 2019 has been a great year for the company and we believe that this is an opportunity to be watching.
Halo Labs: An Execution Story in the Making
One of the most exciting trends of 2019 has been the increasing demand for cannabis oil, especially high CBD oil. We believe that this trend is just getting started and have been focused on the companies that are capitalizing on the cannabis oil opportunity.
Halo Labs (HALO: NEO) (AGEEF: OTC) is a company that has been capitalizing on the cannabis oil market and we have been highlighting this opportunity since late 2018. The company is in the middle of a major expansion and has been executing flawlessly. 2019 has been a banner year for the cannabis oil company, having reported record revenues for the month of January, February, and March.
Although the company has not formally announced quarterly earnings, we can use the revenue numbers reported for these months to determine how well it has performed during the first calendar quarter of 2019. Earlier this week, Halo Labs reported to have generated $3.7 million (CAD) in revenue during March. This comes after the company reported $3.4 million (CAD) and $3.1 million (CAD) for the month of February and January, respectively.
2019 has been a stellar year for Halo Labs and the recent developments have been significant. The company has benefited from its expansion into California and Nevada, and we are favorable on the growth prospects associated with these markets. Prior to this expansion, Halo Labs was only levered to the cannabis oil opportunity in Oregon and we are bullish on the expanded focus.
Over the next few months, we expect Halo Labs’ fundamental story to continue to improve and this is something that investors should be watching. When compared to its peers, the company’s valuation is attractive, and we are favorable on its catalysts for growth. This is a company that is high on our radar and we suggest keeping an eye on this one.
Plus Products: A Leading Cannabis Edible Brand
California has been on the most attractive cannabis markets for businesses and this is an opportunity that we have been watching. One of the reasons we are favorable on this market is due to the sheer size of it. With a population of more than 30 million, California is the world’s largest cannabis market and we have been focused on companies that have been capitalizing on this opportunity.
We are favorable on the smokeless product market and consider it to be one of the most attractive segments of the cannabis industry. Plus Products (PLUS.CN) (PLPRF) is a California cannabis company that has been capitalizing on the smokeless product market through its line of edible products and is a company that investors should be watching.
In late March, Plus Products released unaudited revenue numbers for the fiscal period that ended on December 31, 2018. During this period, the company generated $8.4 million of unaudited revenue and this represents more than 680% growth when compared to the same period last year. The revenue growth was driven by sales of Plus Products’ concentrated brand portfolio of four full-time SKUs and one rotating seasonal. We are favorable on the company’s growth prospects going forward and its plans to increase the number of SKUs following the acquisition of GOOD CO-OP in late 2018. This was a significant acquisition and we expect it to prove to be accretive in the first half of 2019.
During the last year, Plus Products has been advancing its position in the California market and has been increasing its market share at a staggering rate. These statements are not considered to be an opinion and have been confirmed and verified through data that is provided by BDS Analytics and Headset, two leading cannabis market research firms. According to BDS Analytics, the company’s retail sales in the fourth quarter were $10.53 million, an increase of 39.6% over the third quarter of 2018. According to retail analytics firm Headset, the company’s Uplift Sour Watermelon gummy was the top selling branded product across all cannabis categories in California in 2018. This is a significant accomplishment for the company and is a testament to the quality of its product.
Plus Products is in the middle of a major expansion (fully funded) and is constructing the largest dedicated cannabis food manufacturing facility in the United States. Plus holds the eighth temporary manufacturing license granted in California and was one of the first to introduce fully compliant products to the state. With a nationwide expansion on the horizon, the company has significant growth prospects and is an opportunity to be watching.
iAnthus Capital: Well Positioned for Growth Going Forward
The United States cannabis market has been gaining considerable traction and investors have been highly focused on this burgeoning opportunity. iAnthus Capital Holdings, Inc. (IAN.CN) (ITHUF) is a company that has been nothing short of an execution story and recently completed the acquisition of MPX Bioceuticals. We are bullish on the growth prospects of the combined company and this is an opportunity we are monitoring.
Earlier this week, the United States cannabis retailer released fourth quarter financial results for the period that ended on January 31st. Although iAnthus reported a large net loss for the quarter, revenue growth was strong and most of the net loss was related to non-cash charges. During the quarter, iAnthus reported a $15.9 million net loss (includes $9.9 million of non-cash charges) on $2.2 million in revenue. When compared to the same period last year, revenue grew by more than 160% and this is significant.
When it comes to iAnthus’ growth prospects, there is a lot to be excited about. Through organic and inorganic growth initiatives, the company has expanded its reach and we will monitor how the team continues to execute. During the last year, total assets increased to $168.4 million from $45.8 million and the increase is related to the acquisitions in Florida and New York as well as the continued build-out of cultivation facilities and dispensaries across the company’s operating entitles.
iAnthus has been very busy on the acquisition front and we have been favorable on this focus. Through the MPX acquisition, the company acquired cannabis operations in Arizona, Nevada, Maryland, and New Jersey. When you combine MPX’s assets with the assets in Florida and New York that were acquired by the company, you have a cannabis business that has leverage to some of the most exciting markets in the United States.
iAnthus currently generates revenue in 9 out of 11 states across its footprint. The company expects to start generating revenue in California in the next 60 days and we are favorable on this opportunity. The California market is significant, and we are bullish on the leverage to this market.
During the last year, iAnthus has been nothing short of an execution story and we are favorable on the advancements in the business. The company has incredible growth prospects and is an opportunity we are closely watching.