Cannabis Stocks Worth the Attention of Smaller Players: Columbia Care, Fire & Flower
While for the moment these companies might not be what really big players are after, they are worth the attention of other players.
Sundial Growers and OriganiGram were some of the most successful stock-performing companies in the first quarter of 2021. Then there are other hot performers such as Truelieve, Green Thumbs, and Curaleaf. While it may be tempting to invest in the big names, as a small player, it's not such a bad idea to consider other so-to-say less popular cannabis stocks. Those that hadn't started to take all the headlines yet, and whose growth numbers indicate they just might be regulars on the front pages in the near future.
Writing for The Motley Fool, David Jagielski picks two under-the-radar cannabis stocks that might be a better fit for smaller players. One is Columbia Care, and the other is Fire & Flower. As Jagielski notes, "both businesses are doing well in their respective areas, and their combined valuations don't even total $2 billion."
Just recently, Columbia Care acquired a million square feet of growing capacity in New York, one of the states that rolled out its adult-use cannabis legislation earlier this year. When the state officially launches legal sales in 2021, Columbia Care is set to emerge as the biggest cultivator of cannabis in the state. Add to that the company has dispensaries in 12 states and Washington, D.C. The company's market cap currently rests at $1.4 billion.
Despite strengthening its growing capacities, Columbia Care has also come forward with some fine innovations, such as a cannabis discovery tool called Forage, which helps users find the ideal product or strain that best suits them. The tool might come particularly handy for new users who might not well distinguish what strains are more prone to give energy and which are more prone to relax and make you asleep. Forage asks the users a series of questions before it lays out the suggestions.
Columbia Care also offers credit cards to its customers for spend at its dispensaries, something that helps the brand gravitate away from the burden of working with cash.
Finance-wise, Columbia Care reported sales of $93 million for the first quarter of 2021, which, as Motley Fool's David Jagielski notes, equates to a year-over-year growth rate of 220%. When it comes to its price-to-sales ratio, which is about 5, the company "looks dirt cheap compared to bigger multistate operators."
"Its relatively low valuation and the potential to dominate the New York market make Columbia Care a stock that could be a hot buy -- one that could even double in value going forward," writes Jagielski.
So, while for the moment Columbia Care might not be the cannabis stock the really big players will fight for, it's worth the attention of other players. There's a window of opportunity for smaller players to invest now and in the following months in this stock before the premium investments arrive. And the odds are good that they will.
Fire & Flower
Jagielski also highlights Fire & Flower, a Canadian retailer that recently reported its quarterly revenue increased 91% to $44.1 million year-over-year. The company's gross profit percentage of 37.5% grew from 32.6% compared to the same period in 2020. Its market cap for the moment is $300 million.
Fire & Flowers is good for smaller investors as the company is still expanding. It has not even entered the U.S. market properly yet, but it's willing to do so as the plans are set in motion. In Canada, Fire & Flower has over 80 licensed stores, including in British Columbia where it most recently opened. In the U.S., the brand has negotiated to enter the market in California, and under its strategic agreement with American Acres, Fire & Flower also has an option to acquire American Acres.
Another perk that comes with this company is its technology platform called Hifyre, which could well serve dispensaries from California to Nevada.
Jagielski notes that "for now, Fire & Flower is still growing at a great rate," and it has the potential to "become a big name in the industry, especially with the backing of convenience store giant Alimentation Couche-Tard, which owns 22.4% of the business and has the option to take a controlling interest in the cannabis company."
"Between the low market cap, the impressive growth numbers, and its strong potential to get bigger, Fire & Flower is not a pot stock that I expect will stay this small for long," writes Jagielski.
So, Fire & Flower, too, just might be a genuine opportunity for new investors in the sector, for those who've just started to explore options with cannabis stocks, and generally smaller players who look forward to doubling their money from investments sooner rather than later.