Sep 23, 2021 (WallStreetPR via Comtex) -- No one really argues against cannabis stocks on the basis of "perfect world" fundamentals. The forward demand curve is exceptional, and the legislative momentum is on their side. But there are hurdles - uncertainties.
One of the most important such hurdles is the inability for banks to safely provide basic financial services to companies involved in cannabis-related commerce. This has been a major factor holding back cannabis sales for years. Advocates and activists have tried for all that time to get some sort of legislation on track to finally provide some pathway for standard banking services to ramp up for the sector, but to no avail.
That may be changing as we speak.
The first step toward this change actually happened in April of this year when the House of Representatives passed the Secure and Fair Enforcement Banking Act of 2021 (the "SAFE Banking Act"), which prohibits a federal banking regulator from penalizing a depository institution for providing banking services to a legitimate cannabis-related business. In other words, it allows banks to provide financial services to cannabis companies without needing to have cannabis legalized at the federal level first.
But supporters have had little luck in trying to find a way to get it through Congress. Until this week.
The big shift, as covered by MarijuanaMoment.net , was the successful move to add the SAFE Banking Act as an amendment to the National Defense Authorization Act (NDAA) for fiscal year 2022, clearing it for floor consideration, which is expected later this week.
Even if it runs into another hurdle along the way as it gets scrutinized as an amendment by the Senate, the big shift this week is that we are finding out firsthand that the Act has a lot of bipartisan support. In other words, the big news isn't so much the nifty trick being used to force the key Act onto the floor on Capitol Hill. It's the revelation that the process is making clear that something like this is going to pass before long through one mechanism or another. It has plenty of support in principle.
With that in mind, we take a look at some of the interesting stocks in the space with recent company catalysts.
GrowGeneration Corp /zigman2/quotes/207254713/composite GRWG +1.25% has shown bouts of leadership in the cannabis space over the past year as a pick-and-shovel retail play targeting growers in the cannabis space. The company owns and operates 62 specialty retail hydroponic and organic gardening stores.
GrowGen also operates an online superstore for cultivators at growgeneration.com and B2B e-commerce platform, agron.io. 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 /zigman2/quotes/207254713/composite GRWG +1.25% recently announced the opening of two new hydroponic garden centers to serve the largest hydroponic market in the country, Los Angeles County, California. These locations become the 11th and 12th locations in Southern California. Both locations will be opened for business on September 24, 2021.
A person affiliated with the company was quoted in the release as saying, "These two stores, the largest hydroponic garden centers in Southern California, position GrowGen to sell to the highest concentration of commercial indoor cannabis growers in California."
It will be interesting to see if the stock can break out of its recent sideways action. Over the past week, the stock is net flat, and looking for something new to spark things. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -18%.
GrowGeneration Corp /zigman2/quotes/207254713/composite GRWG +1.25% managed to rope in revenues totaling $125.9M in overall sales during the company's most recently reported quarterly financial data — a figure that represents a rate of top line growth of 189.7%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels exceeding current liabilities ($124.5M against $59.8M).
Cannabis Strategic Ventures /zigman2/quotes/209375974/delayed NUGS -4.24% is a more speculative name in this group. But recent events suggest it's worth a closer look. The company is pursuing a vertical farm-to-sale model in the California cannabis marketplace, and it appears to be actively making strides toward that vision.
For example, the company just this morning announced the long-awaited completion of the transfer of cannabis licenses related to strategic activity from 2019 by the State of California and the City of Los Angeles.
Cannabis Strategic Ventures /zigman2/quotes/209375974/delayed NUGS -4.24% noted in its release that, on June 9, 2019, it entered into a material definitive agreement with LW Ventures, Inc. ("LW") the terms and conditions of which required the Company to restructure its preferred equity and issue common shares to exchange for shares of LW. In turn, LW agreed to fund Company operations up to $8 million and to provide the Company with four cannabis licenses issued by the City of Los Angeles and the State of California for the Retail Sale, Cultivation, Distribution, and Manufacturing of cannabis products.
However, acquiring and transferring the licenses was contingent upon approval of the change of ownership of the licenses by the City of Los Angeles and State of California, and such approval was delayed due to the Covid-19 pandemic. But now, according to its release, that delay is over, and the licenses have now been transferred.