Pot Stock Outperformance and How to Play It (GRWG, MEDH, TLRY)

The monster combination of Aphria and Tilray is a loadstone that has sparked a faith-based move by investors into the cannabis space over recent weeks. That has been helped by continued aggressive speculator involvement in the equities market more generally.

The legal backdrop also received a major boost by the Democrat takeover in Washington DC, suggesting that forward-year estimates for most of the stocks in the cannabis space may hit any number of positive catalysts forcing estimates higher in 2021.

With that in mind, we take a look at some of the most interesting names in the space, including: GrowGeneration Corp (OTCMKTS:GRWG), MedX Holdings Inc (OTCMKTS:MEDH), and Tilray Inc (NASDAQ:TLRY).

GrowGeneration Corp (OTCMKTS:GRWG) trumpets itself as a company that, through its subsidiaries, owns and operates retail hydroponic and organic gardening stores in the United States. The company has been growing rapidly through a series of key strategic moves.

GrowGen carries and sells thousands of products, including organic nutrients and soils, advanced lighting technology and state of the art hydroponic equipment to be used indoors and outdoors by commercial and home growers.

GrowGeneration Corp (OTCMKTS:GRWG) just announced its acquisition of Grow Depot, a two-store chain in Auburn and Augusta, Maine. The acquisition brings the total number of GrowGen hydroponic garden centers in Maine to five, with locations in Auburn, Augusta, Biddeford, Brewer, and York.

“It’s a very exciting time in Maine’s adult-use market, and we’re pleased to expand our footprint in the state through our acquisition of Grow Depot, which has proudly served the Central Maine area for nearly a decade,” said Darren Lampert, GrowGeneration’s CEO. “With our expanded footprint, the Maine market is expected to generate 2021 annual revenues of over $20 million for GrowGen.”

And the stock has been acting well over recent days, up something like 36% in that time. Shares of the stock have powered higher over the past month, rallying roughly 39% in that time on strong overall action.

GrowGeneration Corp (OTCMKTS:GRWG) managed to rope in revenues totaling $55M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 152.6%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($55.3M against $20.9M).

MedX Holdings Inc (OTCMKTS:MEDH) is a more speculative name in this basket of stocks, but may ultimately provide bigger upside potential because it hasn’t already taken on a crowd of trading interest. The company recently issued a corporate update related to an interesting legislative session in Texas earlier this month. The company is a recent pivot into the cannabis space and may deserve a close look given its strong outlook and the promising context offered by the cannabis space as momentum drives new capital toward this growth theme.

MEDH is based in Texas, so the state’s shifting legislative context has had an important impact on the company’s outlook. According to its recent update, there are currently 16 state-level jurisdictions that permit marijuana for adult recreational use and 36 states that allow it for medical purposes. Ahead of the January 2021 legislative session, Texas lawmakers have pre-filed several bills that would expand the state’s medicinal cannabis program and add it to the list of states legalizing adult-use.

MedX Holdings, Inc. (OTCMKTS:MEDH) also notes that it “continues to prepare for these impending legislative changes, finalizing agreements and advancing relationships that will support its growth-by-acquisition strategy and vertical integration.”

More to the point: the company is anticipating that full legalization in Texas is “inevitable” and its franchise development team is “preparing an aggressive growth campaign to re-introduce cannabis to an expanded marketplace”. Management projects that the convergence of coffee and cannabis products will be an effective way to reach consumers previously hesitant to cannabis consumption – which is no doubt the big point.

“We hope to complete our plans to merge and acquire internal and external brands and entities in Q2 and throughout the remainder of 2021,” stated MEDH CEO Hans Enriquez. “We look forward to a favorable outcome of the legislative session and expect expansion to the hemp and medical program in Texas. We are excited to execute our operational strategies in 2021 and prepare for the next phase of growth.”

MedX Holdings Inc (OTCMKTS:MEDH) just regained OTC Markets access, got its last three periods of quarterly filings caught up, and achieved Pink Current status. That now sets up a refresh where MEDH is ready to begin executing its operational strategy for 2021. Given the dramatic strength in the group, that shift stands to potentially pay off for existing stakeholders, especially given its outlook on the Texas legislative context and the steps already underway to capitalize.

Tilray Inc (NASDAQ:TLRY) offers its products in Argentina, Australia, Canada, Chile, Croatia, Cyprus, the Czech Republic, Germany, New Zealand, and South Africa. The company has also been the subject of the recent megamerger in the pot space, combining with Aphria (APHA).

One of Tilray’s key subsidiaries is High Park, which was launched to produce and distribute world-class cannabis brands and products for the Canadian market. Based in Toronto and led by a team with deep experience in cannabis and global consumer brands, High Park has secured the exclusive rights to produce and distribute a broad-based portfolio of cannabis brands and products in Canada, subject to applicable laws and regulations.

Tilray Inc (NASDAQ:TLRY) most recently announced it has agreed with Worldpharma Biotech (“Worldpharma”), through its wholly-owned subsidiary Tilray Portugal Unipessoal Lda., to export Good Manufacturing Processes certified medical cannabis from Portugal to Spain. The shipment marks the first medical cannabis import into Spain by Worldpharma and the 17th country to receive Tilray medical cannabis worldwide.

Brendan Kennedy, Tilray’s Chief Executive Officer, said, “We’re incredibly honored to be the first cannabis company to be approved and to ship medical cannabis into Spain. As we continue to work with regulators around the world, we are grateful to partner with the AEMPS and established pharmaceutical leaders such as Worldpharma Biotech on the distribution of Tilray medical cannabis.”

If you’re long this stock, then you’re liking how the stock has responded to the announcement. TLRY shares have been moving higher over the past week overall, pushing about 58% to the upside on above average trading volume. Tilray Inc (NASDAQ:TLRY) pulled in sales of $51.4M in its last reported quarterly financials, representing top line growth of 0.6%. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($155.2M against $133.5M).

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