Best selling marijuana: Aurora Cannabis Vs. MedMen Enterprises

This article was originally published on Fool.com

If you do not like one sector of the cannabis industry, you always invest another. Two companies that provide examples of alternatives available to investors are: Aurora Cannabis (NYSE: ACB) and MedMen companies (NASDAQOTH: MMNFF). Aurora is one of the largest marijuana growers in Canada, while MedMen is the largest cannabis retailer in the United States.

Until 2018, MedMen wins the victory in stock market performance. But investors are more focused on the future than the past. What is the best marijuana stock now – Aurora or MedMen?

The Aurora Cannabis Case

Aurora Cannabis could be crowned king of abilities in the global cannabis market. The company boasts an annual production capacity funded of more than 500,000 kilograms (about 1.1 million pounds). But that does not include the acquisition of ICC Labs by Aurora, an agreement that will further increase its capacity.

Make no mistake: capacity is essential to success. Neither Aurora nor any of its peers can generate revenue without products to sell. The key, however, is to have enough demand to absorb all production capacity.

This is definitely not a problem at the moment. Aurora is able to sell everything that she can produce in her home country, Canada. However, the company's current production capacity is not close to where it will be in the next two years.

Aurora is certainly a major competitor in the Canadian marijuana markets for medical and recreational purposes. The company has supply agreements with provinces representing 98% of the country's total population. While Canada presents an important opportunity, Aurora knows that its long-term prosperity depends on its international expansion.

That's why Aurora has established itself as a key player in medical marijuana markets around the world. The most important of these markets, for the moment, is Germany. The acquisition of Pedanios by Aurora in 2017 has allowed it to have a strong presence in the German market. Through its partnerships, joint ventures and other acquisitions, the company is also present in several other countries, including Australia, Brazil, Colombia, Denmark, Italy, Malta, Mexico, South Africa and Uruguay.

Aurora's current market capitalization of $ 7 billion seems very strong considering the company's past sales. But if the global market becomes as large as some observers predict (more than $ 100 billion), the Aurora stock price should still have a lot of room for maneuver.

The MedMen Enterprises case

The main investment argument of MedMen Enterprises is quite simple. The United States remains by far the largest marijuana market in the world. MedMen is the first retailer in the United States. MedMen will do the same with the growth of the US market.

There is no doubt that the United States is the 800-pound gorilla in the global marijuana market. Legal marijuana sales are expected to reach $ 22 billion by 2022. There is also no question that MedMen is the largest cannabis retailer in the United States. The company currently operates 14 cannabis retail stores in three states.

But MedMen should soon become much bigger. The company recently announced the purchase of PharmaCann for $ 682 million, the largest acquisition in the history of the marijuana industry in the United States. This agreement will make MedMen the largest cannabis company in the United States, with 66 retail locations and 13 crop / production facilities.

This is where retail clinics and growing facilities make MedMen particularly attractive. The company is already operating in the highest price of all – California, plus Nevada and New York. The acquisition of Treadwell Nursery by MedMen also places the company in Florida, which is expected to become the third largest marijuana market in the United States by 2022.

The agreement with PharmaCann will however allow MedMen to be present in other states: Illinois, Maryland, Massachusetts, Michigan, Ohio, Pennsylvania and Virginia. Upon completion of the acquisition, MedMen will operate in 12 US states that collectively account for more than half of all US marijuana sales.

But MedMen is not limited to the United States. The company has also established partnerships with Cronos Group to launch retail cannabis stores in Canada.

Best marijuana stock

The cases for Aurora Cannabis and MedMen are based on key growth assumptions. I think the growth assumptions for MedMen are more realistic for the next few years. And this gives the MedMen the advantage over Aurora.

Aurora, at least for the moment, can not locate in the United States, which puts the company at a significant disadvantage in terms of growth potential. Although the situation may change in the future to allow Aurora to enter the US market, there is no guarantee of knowing if or when it will occur.

The main obstacle to achieving marijuana growth forecasts in the United States is probably the possibility for the federal government to crack down on cannabis-related businesses in states that have legalized marijuana. I think the probability that this scenario will occur continues to decrease. This is good news for MedMen.

The MedMen stock is still expensive, though. Personally, I would prefer the company to finalize the PharmaCann transaction and generate significant revenue and profit before qualifying the purchase action. However, I think MedMen is the best marijuana stock in Aurora and investors should keep it on their radar screens.

Keith Speights does not own any of the shares mentioned. The Motley Fool US does not hold any of the shares mentioned. Motley Fool has a disclosure policy.

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