Over the years, an increasing number of Americans have been in favor of making marijuana usage legal. And with President Joe Biden assuming office, the marijuana industry has a big reason to celebrate. Biden and Vice President Kamala Harris have ben vocal supporters of adult-use marijuana decriminalization. In turn, marijuana stock have already been surging higher on hopes of decriminalization. So with positive industry tailwinds likely, it’s a good time to consider exposure to some marijuana penny stocks.
It’s worth noting that the novel coronavirus pandemic and recession has increased government spending. In fact, tU.S. federal debt has surged to $26.9 trillion. Thus, the government will be looking at additional sources of tax revenue. This is one factor that can potentially accelerate the nation-wide decriminalization of marijuana.
Another potential industry trend is merger and acquisitions (M&A). In December 2020, Tilray (NASDAQ:TLRY) and Aphria (NASDAQ:APHA) announced a merger, which creates the world’s largest cannabis company. I will not be surprised if one or more of the marijuana penny stocks discussed are merger candidates.
So, let’s discuss some marijuana penny stocks that are positioned to deliver multi-fold returns. They are:
- Sundial Growers (NASDAQ:SNDL)
- Nextleaf Solutions (OTCMKTS:OILFF)
- Namaste Technologies (OTCMKTS:NXTTF)
- Emerald Health Therapeutics (OTCMKTS:EMHTF)
Now, let’s dive in and take a closer look at each one.
Marijuana Penny Stocks: Sundial Growers (SNDL)
A year earlier, SNDL stock was trading at $3.50. However, the stock plunged to an all-time low of 13 cents in October 2020. Currently, SNDL stock is back up to more than 60 cents. And with the market for marijuana gradually opening-up, I see scope for further upside.
As an overview, Sundial is focused on premium cannabis products that include oil, vapes, pre-roll, topicals and flower. For the third quarter of 2020, the company derived 77% revenue from branded cannabis products.
Recently, the company launched premium concentrates under its Top Leaf brand. This is in-line with the demand for solventless cannabis extracts. In Q4 2020, Sundial also launched cannabis-infused chocolate bars, drinking chocolate and infused sugar in collaboration with Choklat.
It’s also worth noting that for Q3 2020, the company’s sales and marketing expenses increased by 120% with ramp-up in brand investment. New product launches coupled with focus on increasing brand visibility should help in triggering top-line growth in the coming quarters.
Overall, SNDL stock is probably among the best marijuana penny stocks. And it would not surprise me to see the stock deliver multi-fold returns from current levels.
Nextleaf Solutions (OILFF)
OILFF stock currently trades at a market value of just $23.75 million. I believe that OILFF stock has significant upside potential and worth considering at current levels of around 20 cents.
Nextleaf Solutions identifies itself as the “world’s most innovative cannabis extractor developing patented technology for distilling THC and CBD oils for the wholesale market.” This is not just a claim. It’s backed by the fact that the company has 70 issued patents globally with another 50-pending approval.
Moreover, there has been a flurry of news for the company in the recent past. The company was awarded a U.S. patent for cannabis extract. Nextleaf also delivered 100 kilos of CBD distillate to one of Canada’s top selling cannabis brands.
Additionally, the company received a research license for sensory evaluation with human subjects. And in other big news for fiscal year 2021, the company received patent for the acetylation of cannabinoids. The company believes that “acetylating cannabidiol will enhance the therapeutic potency of CBD.” This patent is likely to be licensed to a pharmaceutical partner.
Overall, Nextleaf is well positioned to accelerate growth through licensing of patents. And as the company’s oil processing capacity increases, there will be room for further top-line growth.
OILFF stock would therefore be among the top marijuana penny stocks to consider for your portfolio.
Marijuana Penny Stocks: Namaste Technologies (NXTTF)
NXTTF stock is another interesting name among marijuana penny stocks. The stock currently trades at around 20 cents per share with a market value of nearly $81 million.
The company is Canada’s first omni-channel cannabis distribution platform with a vision of being the “Amazon of Cannabis.” The company has an online and offline distribution network that includes 300 retail stores and e-commerce marketplace.
It’s also worth noting that there is a crowd of cannabis companies (listed and un-listed). However, Namaste Technologies is not a competitor in the crowded space. Instead, the company is acting as an omni-channel distributor in Canada.
In the coming years, expansion outside Canada is very likely. The company is already exploring entry into the United States, and believes that the worldwide legal cannabis market is expected to touch $74 billion by FY2027. This provides a clear growth opportunity in the coming decade.
For Q3 2020, the company reported revenue of $5.6 million, which was higher by 49% on a year-over-year basis. With that in mind, I expect robust growth to sustain. Namaste Technologies is debt free with cash and equivalents of $13.6 million. The company therefore has ample financial flexibility to pursue aggressive growth.
Overall, NXTTF stock is worth considering for possible multi-fold returns. And a small-exposure to this high-risk-high-return stock makes sense at current levels.
Emerald Health Therapeutics (EMHTF)
Among penny stocks, EMHTF stock is another attractive name to consider. The stock currently trades at 18 cents and boasts a market vlaue of $37 million. In the last six months, EMHTF stock has trended higher by about 30% — and I expect the positive momentum to sustain.
The company primarily focuses on health and wellness-oriented cannabis products. In December 2020, the company delivered its first shipment and delivery of Emerald medical cannabis oil to patients in Sweden.
The company’s portfolio of products includes fast action spray, dried flower and cannabis oil. But once the health and wellness product portfolio expand, I expect top-line growth and reduced cash burn. The company’s EBITDA loss fell to $3.9 million in Q3 2020 as compared to an EBITDA loss of $6.7 million for Q3 2019. And once operating level profitability is achieved, the stock is likely to surge higher. I expect that in the next few quarters.
On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modelling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.