Here’s the Cannabis Stock With the Most to Gain From Trump’s Marijuana Rescheduling Push

President Trump showed support for looser regulations in the cannabis industry even before he was elected for his second term in office. For instance, he supported an initiative in his home state of Florida that aimed at making recreational use of marijuana legal for adults. And since he took office for his second term, there has been significant progress in the industry. Products containing marijuana approved by the U.S. Food and Drug Administration — as well as medical marijuana products regulated at the state level — are now deemed Schedule III substances, when they were previously in the Schedule I category.

Recently, there was also a hearing to consider moving even more cannabis products into Schedule III. These changes may have a wide-ranging impact on the industry, and one company that could benefit the most is Green Thumb Industries (GTBIF +1.89%). Here is why.

Image source: The White House.

One of the best cannabis stocks to buy

Green Thumb Industries is a multi-state operator (MSO) with over 110 retail stores and 20 manufacturing facilities across 14 states. The company has focused primarily on establishing a foothold in limited-license markets, or states where regulators put a cap on the number of licenses available for marijuana-focused businesses. This strategy has proved to be a winning one.

Green Thumb Industries has built a competitive edge in these states, given their regulatory barriers to entry, and, thanks to its financial discipline, it has grown revenue at a good clip while achieving something few cannabis players have: consistent profitability. In the first quarter, Green Thumb Industries’ revenue increased 7.4% year over year to $300.2 million. Its earnings per share were $0.07, up from $0.04 in the year-ago period.

Today’s Change

(1.89%) $0.13

Current Price

$7.00

Key Data Points

Market Cap

$1.5BMarket cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary.

Day’s Range

$6.86 – $7.11

52wk Range

$5.29 – $10.43

Volume

624.7K

Avg Vol

530K

Gross Margin

45.02%

Recent changes in the cannabis industry may help boost the company’s profits and margins. Companies that distribute Schedule I or Schedule II substances cannot deduct normal business expenses. So, as long as marijuana products fall into either of these categories, corporations like Green Thumb Industries will have to deal with this law, which significantly impacts their profits. But if all cannabis products are placed in Schedule III, Green Thumb Industries will be able to deduct normal business expenses, significantly improving its profits and margins. While its peers in the industry will reap the same benefits, Green Thumb Industries has a much stronger business than almost any of its competitors.

It looks like one of the top stocks in the industry and may be a decent long-term option, especially if management is right about the direction of the cannabis market. Green Thumb Industries thinks that the cannabis industry could rival alcohol and tobacco in sheer size. If this is correct, industry leaders could perform well over the medium term, especially as the legal landscape improves. There is the very real risk that things don’t go as planned on that front, or that legal cannabis players continue losing significant market share to illegal channels. Green Thumb Industries remains a somewhat risky stock for these (and other) reasons. But for investors interested in cannabis stocks, there is hardly a better pick.