Even the greenest cannabis investors are familiar with Canopy Growth Corporation(NYSE:CGC) and its growing footprint of production facilities in Canada and beyond. What you might not realize, though, is that most budding canna-businesses in the U.S. can’t borrow enough money to build a doghouse. Innovative Industrial Properties Inc. (NYSE:IIPR) is essentially a landlord that specializes in leasing properties to state-licensed operators of U.S. medical marijuana facilities.
Canopy Growth is the world’s largest medical cannabis company and has fingers in several potentially lucrative pies, but Innovative Industrial Properties already pays its investors a quarterly dividend. Let’s stack them side by side to see which is the best pick at the moment.
The case for Canopy Growth Corporation
It’s hard to know what shape the global cannabis industry will take in the years ahead, but Canopy Growth Corporation has one important advantage that will help it play a major role. Earlier this month, Constellation Brands closed on its 5 billion Canadian dollar investment in Canopy Growth, which should give the company’s increasingly diverse operations plenty of chances to shine before cash on its balance sheet dwindles.
Canopy Growth also boasts multiyear supply agreements that require the company to supply Canadian provinces with at least 67,000 kilograms annually. To top it off, Canopy reported an industry-leading average selling price of CA$8.94 per gram during the three months ended June.
Basic arithmetic suggests we can expect Canadian supply agreements to add around CA$600 million in annual sales to the top line, but that may not be the case. During the three months ended June, Canopy reported total revenue of CA$26 million, 14% of which came from Germany’s extremely high-priced medical marijuana market. While high-margin international sales are a big plus for Canopy Growth now, an oncoming supply glut in the much larger Canadian market will probably take a heavy toll.
Canopy Growth boasts a whopping $14.1 billion market cap at recent prices that’s going to be hard to live up to. Investors are expecting sales to quickly soar far past any amount possible based on present supply agreements, and investors should…
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