2021 Buyout Targets:
The 4 Most Acquisition-Prone Cannabis Stocks

You’ve probably heard of Aphria (NASDAQ: APHA). It’s one of the biggest Canadian cannabis companies by market capitalization.

Aphria shareholders have nearly quintupled their money in the last six months, even though the company isn’t yet profitable on an annual basis.

So why is it up 375%? One word: buyout.

On December 16, 2020, Tilray (NASDAQ: TLRY) announced that it would acquire Aphria in a reverse merger transaction worth $4 billion to form the world’s largest cannabis company.

It’s just one example of a consolidation trend that has swept the industry in recent months — and is only gaining speed in 2021.

That’s because this merger fervor is expected to move south from Canada into the world’s two largest cannabis markets…

Why The U.S. Market Is So Important — And So Fragmented

Simply put, America’s appetite for pot dwarfs that of Canada's — and every other country's. According to Statista, California alone is the largest legal cannabis market in the world with some $7 billion in combined recreational and medical sales in 2020, compared to Canada’s $6.9 billion nationwide.

And according to cannabis industry research firm New Frontier Data, the total U.S. legal cannabis market was worth $13.2 billion at the end of 2019. It’s expected to grow at a compound annual growth rate (CAGR) of 21% to more than $41 billion by 2025. That means tripling in size within five years.

In the first few months of the COVID-19 pandemic, many analysts expected the cannabis industry to be devastated by lockdown orders — but the opposite has happened. Established legal markets like Colorado and Oregon saw 26% and 29% annual sales growth in 2020, respectively, according to a report by cannabis sales data provider BDSA.

Meanwhile, new markets expanded rapidly. Illinois, which sold its first bud of legal cannabis in January of 2020, saw its market top $1 billion in its first year of operation. Getting stoned has been one of the most popular ways to cope with quarantines across the country.

Of course, none of this demand growth has changed the fact that marijuana is still federally illegal in the U.S. Nor the fact that this ongoing federal prohibition effectively prohibits legal cannabis companies from accessing banking services, building interstate supply and distribution infrastructure, or listing on U.S. exchanges.

As a result of this legal dichotomy — permitted at the state level, prohibited at the federal level — America’s biggest publicly-traded cannabis companies are multi-state operators (MSOs). MSOs are holding companies that own several independent cannabis production or distribution firms in different legal states, and which are usually listed on over-the-counter (OTC) exchanges.

Several of these MSOs are likely to be the next buyout targets for the big Canadian firms. We’ll discuss why — and name the specific MSOs in focus — shortly.

For now, it’s worth mentioning that President Biden has pledged to reschedule cannabis, a move that could pave the way for the creation of true interstate cannabis companies and open the door to multinational acquisitions.

Even farther south, Mexico’s Congress passed a bill in March that would decriminalize cannabis for recreational, medical, and scientific uses. The bill is backed by President Andres Manuel Lopez Obrador — and could create the world’s second-largest legal market.

In summary, the U.S. and its southern neighbor have overtaken Canada to become the world’s most important cannabis markets — and Canadian firms will need to find a way to claim a share of them…

Canadian Firms Are About To Snatch Up American MSOs And Mexican Suppliers Like Hotcakes

That’s because Canada’s cannabis market isn’t just small — its growth is also rapidly slowing.

In April of 2020, the Canadian Imperial Bank of Commerce slashed its estimate of 2020 recreational cannabis sales from C$3.4 billion to C$2.5 billion, citing slow growth in key provincial markets.

Its 2021 projections are even bleaker, showing pronounced slowdowns in Quebec, British Columbia, and Alberta — Canada’s three most populous provinces after Ontario.

Canadian cannabis market research firm GrowerIQ summarized the current state of the country’s industry in a December 2020 release, writing, “Canada’s cannabis market growth has slowed but remained steady in 2020… While the Canadian ‘green rush’ may be in the past, the market is becoming more stable and expanding internationally.”

Indeed, the country’s largest cannabis firms appear to be amassing war chests to expand beyond Canada’s borders. Just a handful of top firms — including Canopy Growth Corporation (NASDAQ: CGC) and Cronos Group (NASDAQ: CRON) — are sitting on more than $4 billion in cash.

They seem to understand that they will need U.S. and Mexican market exposure in the years ahead to justify their lofty valuations. At the time of writing, Canopy Growth trades for more than 30 times sales, while Cronos Group trades for more than 75 times sales.

Below, we’re profiling the three U.S. MSOs and one Mexican cannabis supplier that are most likely to become acquisition targets for the big Canadian firms in the years ahead…

Curaleaf (OTC: CURLF)

Founded in 2010 and based in Wakefield, Massachusetts, Curaleaf is the largest MSO in the U.S. by far, with some 96 dispensaries open across the country.

It is also one of the most expansionist cannabis companies in the world, growing rapidly in recent years through acquisitions. In 2020 it became the world’s largest cannabis company by revenue after purchasing Chicago-based competitor Grassroots Cannabis and London-based medical marijuana company Emmac Life Sciences.

Given Curaleaf’s willingness to expand outside of the U.S., a foray into Mexico can’t be too far away.

Such an expansion would make the company even more attractive as an acquisition target than it already is.

Curaleaf has rewarded its shareholders handsomely in the last year, and it’s easy to see why. The company has more than tripled its revenue in the last year, is expected to become profitable this year on an earnings per share (EPS) basis, and has a comfortable debt-to-equity ratio of less than 50%.

But while Curaleaf is the largest MSO in the U.S., it’s not the broadest...

Acreage Holdings (OTC: ACRDF)

That honor goes to Acreage Holdings, a New York City-based MSO founded in 2011 that has a retail presence in 20 states.

Acreage also already has a conditional deal to be acquired by Canopy Growth for $7.65 per share pending U.S. government approval. It currently trades for less than half of that, creating a lucrative arbitrage opportunity for investors who are willing to wait on the Biden administration’s slow-and-steady progress toward legalization…

And even if not for the pending Canopy deal, Acreage would be a good acquisition target. It has grown its revenue by more than 50% in the last year and currently has a debt-to-equity ratio below 70%.

Both of the MSOs discussed above are vying for market dominance at the national scale (or international scale, in the case of Curaleaf). And both firms are likely to remain among the largest in the U.S.

But the third MSO we’ll examine in this report has taken a different approach, one that focuses on America’s fastest-growing state cannabis market…

Trulieve Cannabis (OTC: TCNNF)

Founded in 2016 and based in Tallahassee, Florida, Trulieve is an MSO that dominates the state of Florida, with a 52% market share there.

Florida is by far the fastest-growing cannabis market in the country, with medical sales expected to hit $2.5 billion by 2025.

Trulieve has also expanded into California, Connecticut, Massachusetts, and Pennsylvania in the last year. It’s no wonder shareholders are up more than 700%...

If this wasn’t enough to draw the attention of potential Canadian acquirers, Trulieve is profitable on an earnings basis, has nearly doubled its revenue in the last year, and has a debt-to-equity ratio below 70%.

Of course, none of the three MSOs we’ve profiled in this report currently have any Mexican exposure. And there’s one company poised to dominate the nascent Mexican cannabis market in the coming months…

PharmaCielo (OTC: PCLOF)

Founded in 2015 and based in Toronto, PharmaCielo is a medical cannabis company with a focus on Latin America.

It is currently in the process of obtaining a Good Manufacturing Practices (GMP) certification from the Mexican government, which could allow it to operate as the first legitimate supplier in Mexico’s cannabis market upon legalization.

PharmaCielo released an update in February noting that its GMP certification was proceeding, sending the stock to new heights…

The firm is expected to turn a profit in the next year, and has a very reasonable forward price-to-earnings (P/E) ratio of less than 10, implying that investors are undervaluing the company relative to its growth trajectory.

In other words, even if PharmaCielo weren’t the first mover in Mexico’s nascent cannabis market, it would still be a great takeover target.

Reading The Weed Leaves On The Future of Cannabis in North America

In the last year, the world has suffered through a novel pandemic, and the U.S., Canada, and Mexico have undergone profound political and economic changes.

It’s no wonder that cannabis stocks have been so volatile in the last year…

As you can see above, the four stocks we’ve profiled in this report have done very well in the last year — and should continue to do well in the days ahead. But they’ve whipsawed substantially on their way to big returns…

And this report can’t ensure that you’ll be on the right side of those whipsaws.

To navigate the chaos of the modern cannabis stock universe, you need help from an expert with a proven track record of consistent gains in the sector.

Nick Hodge is one such expert — and his Daily Profit Cycle subscribers have been profiting from his guidance. Cannabis was one of the sectors Nick featured in his Top Sectors for 2021 report, and it has done quite well.

And cannabis isn’t the only up-and-coming sector Nick has his eye on.

He thinks virtual power plants are going to be one of the biggest investment themes of the entire cleantech transition. Elon Musk even says they’re going to grow faster than electric vehicles!

They’re already being used to prevent the next blackouts in many cities across the world.

And one company is taking the lead as the installer and manager of these decentralized power plants.

To show you how they work — and how getting in now could lead to 60,000% profits just like when Amazon disrupted retail — our founder, Nick Hodge, has put together a special video.

Click here or below to watch it.