California may be ahead of the curve when it comes to legalizing marijuana. But complex and disjointed regulations have held back California marijuana stocks.
The lag comes after lawmakers decided to leave regulation up to the 58 counties and 482 incorporated towns and cities. This led to an inconsistent patchwork of laws that are different on one side of the street than the other.
They're attempting to fix this dilemma, but it could take some time for marijuana stocks to respond. One thing is clear, however: This will be a massive legal marijuana market with billions in revenue potential. And here's why.
Many investors are missing the fact that California's neighbor, Nevada, has also legalized recreational marijuana and doesn't have quite the legislative tangle.
In fact, the Silver State was watching California closely to make sure it didn't make the same mistakes. So far, it hasn't. Nevada's taxation and regulation were done deliberately, meaning Nevada will charge you less to set up a business, grow, sell, and buy weed than its neighbors.
In 2017, Nevada's legal marijuana sales were $103 million, and that figure is expected to skyrocket 690% to $814 million by 2025.
This fact alone makes Nevada one of the most critical marijuana markets in the world at this point. Several recent transactions have proven this.
If you've been looking to California for the top cannabis stocks, you may want to consider its neighbor in the Southwest.
In fact, two of our best cannabis stocks just made major acquisitions in Nevada...
These Are the Top Marijuana Stocks to Watch in the Southwest
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Cresco Labs Inc. (OTCMKTS: CRLBF) is a Chicago-based company that grows, manufactures and sells legal marijuana products. It offers cannabis products in flower, extracts, edibles, and vape versions under several different brands.
Cresco recently acquired a company called Tryke, which operates the successful Las Vegas dispensary known as "Reef."
This new purchase is going to make Cresco a more significant player in the Las Vegas market, allowing it an instant 8% share of the market. Beyond the main Reef dispensary business, which sits adjacent to the successful Planet 13 Holdings Inc. (OTCMKTS: PLNFH) store, Tryke also has a second North Las Vegas location, which reports the state's highest traffic rates.
Additional locations can be found in Sun Valley and Sparks, which both lie on the outskirts of Reno.
Cresco is also getting access to multiple locations in the Arizona market. This is another lucrative market that we plan to write more about in the coming months. In general, look for recreational use to become a reality here soon. Similar to the battle that waged in Florida, voters and investors will see the money involved in legal cannabis and vote with their wallets.
While the most important news for Cresco relates to operations in Nevada, the company also got a license in Utah out of the deal.
Cresco paid just over $282 million for Tryke, which was more than a fair deal. Interestingly, many of Tryke's sellers are snapping up Cresco stock. There's a strong belief that this is currently undervalued and set to become a powerhouse.
The other legal cannabis stock to watch is iAnthus Capital Holdings Inc. (OTCMKTS: ITHUF), which also announced an acquisition in Nevada.
The company is a marijuana cultivator that sells to dispensaries, and it just won four retail operations licenses in Nevada to complement those operations. Unfortunately, the licenses are being held up in court. So, instead of waiting out the litigation, the company bought Sierra Well, which owns two dispensaries in Carson City and Reno.
Drivers will pass through Carson City on the way north to Reno, and the mid-sized town is another tourist destination.
iAnthus paid $27 million for the company, and the sellers didn't even want much cash. Instead, they're taking 80% of the sales proceeds in iAnthus stock.
These two transactions are proof that the cannabis industry still has lots of growth ahead. Companies continue to maneuver themselves into position in the most lucrative markets. The higher valuations will come, and the investors that get in the soonest will have the opportunity for the largest gains.
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