Cannabis sales in Nevada are expected to climb from $103 million in 2017 to $814 million by 2025, and these two companies want in on the action…
Nevada is the most important cannabis market in the world.
I’ve written that on a number of occasions. I mostly focus on Las Vegas because of its immense size, but the Reno market is also incredibly important – it’s basically a baby Vegas.
Las Vegas has about 40 million visitors each year, but Reno still brought in more than 5 million in 2018. The tourists visiting are looking to get away from their normal lives for a few days and are increasingly trying cannabis products during their vacations.
Cannabis tourism in Nevada is going to be a massive market, and the publicly traded cannabis companies that don’t already have a strong presence are realizing that they have to be there.
In the past couple of weeks, there have been two transactions that have validated the value of the Nevada market.
Cresco’s Jump into the Nevada Markets
This acquisition will turn Cresco into an important player in the Vegas market, moving the company to an 8% market share. In addition to the Reef dispensary – which is right behind the wildly successful Planet 13 Holdings Inc. (CSE: PLTH, OTC: PLNHF) store – Tryke operates a Reef location in North Las Vegas, which sees the highest traffic in the state.
It also has locations in Sparks and Sun Valley, which are both just outside of Reno.
As a bonus, Cresco gets locations in the Arizona market.
I’ll be writing a lot about Arizona in the coming months.
It’s a highly successful medical cannabis market with a high probability of allowing recreational use very soon. It’s similar to the booming Florida market, and public companies are taking notice. There will be a battle for Arizona, just as there is for Florida, and investors stand to profit if they understand the market.
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Cresco also got a license in Utah, but Nevada was the big news in the Cresco acquisition.
And Cresco paid a full and fair price for its assets – over $280 million. Private sellers don’t care that panicky retail investors have put the cannabis stock under pressure. If you want to buy their business, you have to pay full price.
What’s more, the sellers are taking the vast majority of their money in the form of Cresco stock; they believe it’s just as undervalued as I do.
iAnthus Hits Vegas
iAnthus recently won four licenses for retail operations in Nevada to complement its existing cultivation operation, which currently sells to other dispensaries.
But those licenses are being held up by litigation in the state, and Nevada is too important of a market to wait around for the courts. iAnthus got proactive and bought its way into the market. It acquired a company called Sierra Well, which operates two dispensaries in Reno and Carson City.
Carson City is just to the south of Reno – drivers from the Bay Area in California can pass through on their way to Reno and it’s a tourist destination in its own right. The company also gets more cultivation space for its growing suite of brands that it sells to other dispensaries in the state.
iAnthus also paid up.
It’s paying $27 million for the acquisition.
And once again, the sellers didn’t want money. They’re taking over 80% of the purchase price in iAnthus shares.
These transactions should be instructive for public shareholders who have taken a beating this summer. The industry fundamentals are still intact, and companies are scrambling to position themselves in the most important market in the world because the branding thesis is so compelling.
And people who own their own cannabis companies are unwilling to sell at the levels the market is indicating now.
They’re waiting for the higher valuations to come.
Around this time next week, I’ll be sharing with our Cannabis Investor’s Report readers a complete who’s who for the Nevada market. Who is strong there, who is there but weak, who is in need of improvement, and who is on the outside looking in.
In that report, I’ll have some thoughts on how to play the Nevada market for maximum profits.
Executive Director, National Institute for Cannabis Investors
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September 25 2019