Unlike a very difficult year in 2019 for a majority of marijuana stocks, 2020 has started off on a better note overall. While some stocks continue to drop, others have exploded out of the gate.
Three high-flying marijuana stocks in January that especially stood out are Namaste Technologies (OTC: NXTTF), KushCo Holdings (OTC: KSHB), and Innovative Industrial Properties (NYSE: IIPR). Here’s why these stocks performed so well — and whether or not they’re smart picks to buy now.
Namaste shares skyrocketed 91% in January. The big news for this provider of an online platform for cannabis products and accessories was its announcement that Health Canada had awarded a license to Alberta-based Choklat for processing cannabis-infused chocolate bars, drink mixes, and sugar.
This license is great news for Namaste because it owns 49% of Choklat. Namaste CEO Meni Morim said: “We believe there is pent-up demand for cannabis-infused edible products on a national scale. Choklat is amongst the first food processors in Canada to get its processing license from Health Canada.” Morim added that Choklat’s first products will hit the market in March.
The news for Namaste hasn’t been very good for quite a while. Its revenue deteriorated in 2019. Former CEO Sean Dollinger was sacked in the wake of a scandal over inside deal-making. But Morim has moved firm forward since taking the helm last year.
KuschCo stock rised 23% in the first month of 2020. The ancillary marijuana products and services company published its fiscal 2020 first-quarter results on Jan. 8.
As revenue in Q1 increased 38% year over year to $35 million, the company’s bottom line dropped with a net loss of $12.5 million compared with $8.6 million in the prior-year period. But investors seemed to like that the market dynamics for KushCo are improving.
A significant portion of revenue comes from vaping products. The vaping health scares that made headlines in 2019 took a toll on the company’s sales. But CEO Nick Kovacevich said earlier this month that there have been several positive developments, including a decline in new reports of vaping-related illness, and states holding off on implementing bans on vaping products. He predicted that KushCo’s customers would gradually resume their purchasing patterns in the second half of the company’s fiscal year.
Innovative Industrial Properties
The Shares of Innovative Industrial Properties (IIP) skipped 18% in January. Most stocks drop on the news of a public offering, but not IIP. The marijuana-keen real estate investment trust (REIT) announced an offering of nearly 3 million shares, and its stock continued to climb.
Very likely the primary reason investors cheered rather than jeered IIP’s stock offering is that they’re confident that the company will put the $250 million that it’s raising to good use.
So far, IIP has 48 properties in 15 states, with 98.9% of the total square footage of these properties rented to cannabis operators.
The company’s business model appears to be working quite well. Its net rental revenue more than tripled year over year in the third quarter of 2019. Unlike most marijuana stocks, IIP is consistently profitable, with its net income soaring 314% year over year in Q3.
Marijuana Stocks, Are they buys?
Marijuana stocks tend to be really volatile. Big gains like the ones generated by Namaste, KushCo, and Innovative Industrial Properties in January are often followed by big downswings.
I’m cautiously optimistic about the prospects for Namaste and KushCo. Both companies seem to be getting back on track after major drawbacks last year. I wouldn’t call any of these stocks buys just yet.
Alternatively, I continue to regard Innovative Industrial Properties as one of the best marijuana stocks on the market presently. The company has a clear runway for growth. Its management continues to execute well. And IIP’s annual revenue yield of 4.25% is very attractive. Not every month will be as good for IIP as January was, but I think that this stock should be a winner over the long run.