Potential 170% Gain From Columbia Care Inc, a Pure-Play U.S. Pot Stock

CCHWF Stock Perfect for Contrarian Pot Stock Investors?

Marijuana stocks can’t seem to attract any sustained oversold buying interest, despite the ETFMG Alternative Harvest ETF (NYSE:MJ) being down by a whopping 62% from its “Reddit”-driven level in February.

Just when you thought the worst was over and a base could form, more selling surfaced.

Investors have clearly adopted a wait-and-see approach toward pot stocks as marijuana companies work on growing their revenues and streamlining their costs.

With most marijuana stocks plummeting to 52-week lows, I see aggressive opportunities to enter the market.

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Take the case of Columbia Care Inc (CNSX:CCHW, OTCMKTS:CCHWF), which is down by 60% from its 52-week high. On November 4, Columbia Care stock fell to a 52-week low of $2.83, and it’s still hovering just above that level.

At its current price, CCHWF stock is worth considering by aggressive traders.

What I like about Columbia Care Inc is its focus on the U.S. pot market. The company grows and sells both medical and recreational cannabis, along with cannabidiol (CBD) products.

The vertically integrated pot operator owns major cultivation and manufacturing operations, along with about 90 dispensaries. Its top five markets by revenue are California, Colorado, Massachusetts, Ohio, and Pennsylvania. (Source: “Columbia Care Reports Record Third Quarter 2021 Results,” Columbia Care Inc, November 12, 2021.)

Don’t Be Scared by the Columbia Care Stock Chart

A look at the below CCHWF stock chart doesn’t exactly instill confidence. Columbia Care stock is well below its 50-day and 200-day moving averages and is firmly entrenched in a death cross pattern.

Chart courtesy of StockCharts.com

Sure, the technical picture doesn’t look great, but given Columbia Care Inc’s strong fundamentals, CCHWF stock’s downward price action hasn’t been justified.

If the company continues to deliver wonderful financial results, I could see a pathway for Columbia Care stock back toward its 52-week high, representing a potential move of 150%, versus what I view as limited downside.

Revenues Expected to Surpass $500 Million

In 2020, Columbia Care reported revenue growth of 131.7% to a record $179.5 million, representing its fourth straight year of significant revenue growth. (Source: “Columbia Care Reports Record Fourth Quarter and Full Year 2020 Results; Reaffirms 2021 Guidance,” Columbia Care Inc, March 16, 2021.)

The current year has been great for Columbia Care. Its revenues for the first nine months of 2021 were $320.8 million. (Source: Columbia Care Inc, November 12, 2021, op. cit.)

In the third quarter of 2021, the company saw record adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $31.0 million.

In its third-quarter report, Columbia Care Inc raised its revenue guidance to $470.0–$485.0 million, representing year-over-year growth of 162%–170%. The company isn’t profitable yet, but it’s expecting adjusted EBITDA income of $85.0–$95.0 million this year.

Analyst Take

The U.S. has been rapidly legalizing medical and/or recreational pot at the state level, and I feel it’s just a matter of time before recreational pot is decriminalized federally. There are potentially billions of dollars of tax revenues available from the marijuana sector, and we know how much the government loves taxes.

So, while the technical situation for CCHWF stock doesn’t look promising, Columbia Care Inc’s fundamentals give us reason to be optimistic.

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