When it comes to legal weed, Canada certainly has the first-mover advantage … but I’m seeing more opportunity here in the United States for marijuana stocks. Having passed full legalization last fall, Canada is projected to be a $5.9 billion market for legal cannabis by 2022. That’s about where the U.S. market was in 2015. And that was when only four states, plus D.C., had full legalization.
Now we’re up to 11 states when you include Alaska. (And many more allow medicinal use.) By 2017, the U.S. legal marijuana market had exploded 57.4% to reach $8.5 billion.
To put that figure in its proper perspective, the $8.5 billion spent buying legal pot was more money than Americans spent on ice cream!
By 2018, we were at $10.4 billion. And according to Arcview Market Research and BDS Analytics, we’ll easily keep up that pace through 2022 — when U.S. spending will reach $22.2 billion.
That’ll be nearly four times the size of Canada’s marijuana market.
Marijuana Legalization Is on the Move
There’s a huge potential catalyst on the horizon for marijuana stocks, in the form of the STATES Act.
STATES is short for Strengthening the Tenth Amendment Through Entrusting States. The Act is a bipartisan bill put together by Senators Cory Gardner (R-CO) and Elizabeth Warren (D-MA). The legislation was introduced last June. If passed, it would amend the Controlled Substances Act.
This is big because the federal prohibition would be eliminated in states that legalize marijuana. As long as residents follow their state’s laws on marijuana, the federal government would not be able to intervene.
The odds of the bill getting passed this year are very high. It would make it even easier for more states to legalize marijuana. More importantly, it would be the first major step to federal legalization … and that’s when the opportunity opens up all the way.
‘Merger Fever’ Starting to Spread
Harvest Health & Recreation (OTCMKTS:HRVSF) has picked up on the trend of already increasing sales and the potential for explosive growth. The Arizona-based cannabis grower and retailer went public on the Canadian Securities Exchange last November — and is also trading on the OTC Markets in the United States under the symbol HRVSF.
From its home base in Phoenix, Harvest Health has already spread to eight other states (within just six years). And on Monday, it announced a merger with Verano Holdings, in which the combined company will own licenses for up to 200 facilities across 16 states.
The buyout comes with a steep price tag: $850 million (U.S. dollars). That’s the biggest marijuana merger since the $835 million deal between iAnthus Capital (OTCMKTS:ITHUF) and MPX Bioceuticals in October.
Taken together, that’s $1.5 billion in just two corporate mergers. You think they don’t see opportunity?
Harvest may have inked the bigger deal, but I actually prefer iAnthus as an investment.
Ianthus owns and operates cannabis cultivators, processors, and dispensaries in the United States. Now that it has merged with MPX, it has operations in 11 states, more than 60 retail locations, and over 500,000 square feet of cultivation and processing space.
I saw huge upside potential in iAnthus going back to last year. It’s up nearly 30% just in 2019 alone, and management said this will be a “transformative year” for the company. I couldn’t agree more. As the integration of iAnthus and MPX progresses, it will lead to impressive financials as the U.S. opportunity continues to grow.
Based on 2020 revenue expectations of $336 million, iAnthus trades with an Enterprise Value/Revenue ratio of 1.15. This is the lowest of all the major U.S. marijuana stocks. Even more impressive is that iAnthus is expected to be one of the first companies in the industry to turn a meaningful profit.
Based on 2020 earnings estimates, ITHUF stock trades with a price-earnings (P/E) ratio of 17.9. With the kind of growth prospects I’ve outlined here, that makes iAnthus a phenomenal bargain.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of Investment Opportunities and Early Stage Investor. He has dedicated his career to getting investors into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA), +1,044% in Tesla (TSLA), +611% in Liquefied Natural Gas Limited (LNGLY), +324% in Bitcoin Services (BTSC), just to name a few. If you’re interested in making triple-digit gains from the world’s biggest investment trends BEFORE anyone else, click here to learn more about Matt McCall and his investments strategy today.