These 3 pot stocks could see massive upside over the coming year. Here’s why.
If you’ve been waiting for pot stocks to rebound, 2020 should be your year. That’s according to Stifel, which said this week that it expects the sector to rebound in the first half of 2020.
Last year saw a crop of disasters for pot stocks, including the collapse of shares of big names like Canopy Growth (NYSE: CGC) and Aurora Cannabis (NYSE: ACB) which are down -38% and -66%, respectively, over the last year.
But this year, Stifel expects Ontario store openings to help break Canadian growers out of their funk, and U.S. operators should continue to grow out of their northern counterparts’ shadows.
Stifel’s favorite U.S. pot stocks are Green Thumb Industries (OTC: GTBIF), and Curaleaf Holdings (OTC: CURLF), and it also likes Canadian grower Fire & Flower (OTC: FFLWF).
The retail rollout as part of Canada’s pot legalization efforts was botched, especially in Ontario, the country’s most populated province, as evidenced by the fact that by the end of 2019, the western province of Alberta had 300 stores while Ontario had fewer than 25 across the whole province.
This lack of retail availability meant consumers in Toronto continued to purchase cannabis from black-market dealers, and producers like Canopy were forced to take back unsold inventory from wholesalers.
But Ontario is expanding its retail licensing in 2020 and will begin adding 20 outlets per month starting in April, with a year-end total of 250.
According to Stifel analysts Justin Keywood and Rob Fagan, there’s room for even more outlets considering that Ontario has around 1,300 beer and liquor retailers.
As Ontario’s retail distribution opens up, the analysts say Fire & Flower will see the greatest upside. Keywood and Fagan see Fire & Flower’s store count expanding from 30, where it was at the end of 2019, to more than 100 by 2021.
The analysts say this growth will lift the company into profitability and will see shares rise above $2 – more than double where the stock trades at now.
Keywood and Fagan say Green Thumb could nearly triple from its current level to $32, and say Curaleaf could see a similar rise to $24.
The analysts say Curaleaf has the deepest pockets of American operators, which enables it to continue to make acquisitions. “We view the company’s fortified balance sheet as a clear competitive advantage to fuel future value creation,” Fagan said.
Stifel said that well-funded operators are likely to thrive as the marijuana market continues to open up in the U.S. It also has Buy ratings on Cresco Labs (OTC: CRLBF), Harvest Health & Recreation (OTC: HRVSF), iAnthus Capital Holdings (OTC: ITHUF), TerrAscend (OTC: TRSSF), and Trulieve Cannabis (OTC: TCNNF).