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Aurora Cannabis (NYSE: ACB) had a fantastic start in 2019. Its price is up more than 55%. But there is a stock of marijuana with a market capitalization less than a third of that of Aurora who is enjoying a better start to the year. This stock is Green Thumb Industries (NASDAQOTH: GTBIF), up nearly 70% year-on-year.
Which of these two marijuana stocks is the best choice for investors now? Here's how Aurora Cannabis and Green Thumb Industries compare.
Source of the image: Getty Images.
The Aurora Cannabis Case
Aurora Cannabis has not started as the biggest marijuana producer. The company has engulfed marijuana growers from left to right in recent years. But this frenzy of acquisitions has given Aurora the largest projected production capacity in the sector. And capacity is critical to success in the global cannabis market.
The company can already produce about 120,000 kilograms of cannabis on an annual basis. Aurora expects its capacity to reach more than 150,000 kg by the end of the month. And we expect an annual production capacity of 500,000 kilograms.
Aurora Cannabis also has customers ready to buy its products. The company claimed a 20% market share in the Canadian market for recreational marijuana during the quarter ending December 31, 2018. The Aurora distribution network for recreational pots covers approximately 98% of the market. the Canadian population.
The company is expected to experience rapid sales growth as the Canadian market for recreational marijuana matures. Aurora also looks forward to the anticipated finalization of the regulation of cannabis-based beverages, foods and concentrates in Canada later this year.
International markets for medical marijuana should provide an even greater opportunity for Aurora in the long run. Aurora Cannabis CEO Terry Booth said in his second quarter earnings release that Aurora maintained "leadership in the German market and other key international markets". The company is active in 24 countries on five continents.
Although Aurora Cannabis is not always profitable, the company seems to have a good path towards profitability. The sheer scale of Aurora's operations should enable it to reduce its production costs. Its focus on higher margin products is also expected to bear fruit over the next year.
The case of Green Thumb Industries
Green Thumb Industries (GTI) does not work in Canada like Aurora Cannabis does. It does not have operations in Germany or Latin America either. Instead, GTI focuses on the market that Aurora can not compete with: the United States. It is the largest legal cannabis market in the world.
Currently, GTI is present in 11 states and has a population of 146 million. These states include California, Florida and Massachusetts, all of which already have, or expect to have, an annual marijuana market of at least $ 1 billion by 2022.
The state of Illinois, where GTI resides, could also turn to legalizing marijuana for recreational purposes. Governor J. B. Pritzker was elected in November 2018 and pledged to lobby for a recreational legalization of the pot. According to a recent study, Illinois could generate annual sales of marijuana for recreational purposes over $ 2 billion.
A key benefit for GTI is its diversity in the cannabis supply chain. The company has 13 production sites. It holds licenses for 83 retail cannabis stores and currently operates 17 retail cannabis stores. GTI markets six brands of cannabis and will likely continue to expand its product offering.
Like Aurora Cannabis, GTI is not always profitable. The company's operating expenses grew faster than its sales, as GTI focused on its expansion. However, as marijuana markets in the states where it operates mature, GTI should be able to achieve profitability.
Best marijuana stock
I think that one of these two marijuana stocks has a greater opportunity and a more attractive valuation than the other. What stock is it? Green Thumbs Industries.
It is possible that Aurora Cannabis will one day enter the US marijuana market. Until that day, however, GTI still has more opportunities in the market. The GTI stock is also cheaper than the Aurora Cannabis, based on historical sales levels.
The main problem of GTI is that marijuana remains illegal at the federal level in the United States. This is also what prevents Aurora from entering the US market. However, I think the chances of GTI activities being disrupted by federal law enforcement are lower than ever before. In addition, support for changes to federal marijuana laws is increasing. If and when this happens, I think that GTI will probably be one of the biggest winners.
Keith Speights has no position in the mentioned actions. The Motley Fool has no position in any of the actions mentioned. Motley Fool has a disclosure policy.
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