In less than two months the gates to Virginia will be opening wider for cannabis companies. One of the companies looking to take a fast track toward expansion in the state, where recreational cannabis is now legal, is Columbia Care (CCHWF -8.14%).
With established operations and management experience across 11 U.S. states plus the District of Columbia, and one medical dispensary already located in the southeastern portion of Virginia, Columbia Care has the means to expand its footprint successfully. For investors, this expansion could lead to riches in the near future.
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Mid-Atlantic moves
At the tail end of 2020, Columbia Care announced an agreement to acquire Green Leaf Medical, a fully integrated cannabis multi-state operator in the mid-Atlantic region. In doing so, Columbia Care gains access to the largest cultivator in Virginia, retail exclusivity in 20 counties in central Virginia, and licenses to operate a co-located dispensary and five stand-alone dispensaries in the region.
Virginia Gov. Ralph Northam expects the state to begin allowing sales in 2024, which could amount to a market worth $1.5 billion, based on a population size of 8.5 million. That many people, in a state that houses two of the wealthiest counties in the entire country, bodes well for Columbia Care. The state offers an opportunity to not only reach a large population, but also to partner with excellent medical facilities. It also shouldn't hurt that the northern part of the state is sandwiched between Maryland, West Virginia, and Central Virginia, where Columbia Care already has a presence.
With a heavy concentration of dispensaries and newly obtained permits in West Virginia, Ohio, Pennsylvania, and Maryland, Columbia Care is further strengthening an already formidable mid-Atlantic presence. And in an effort to keep its foot on the pedal, the company is making moves in other regions of the country. Following the Green Leaf acquisition, the company expanded its California presence through an acquisition of The Healing Center San Diego, known for consistent revenue growth in a limited-license market with statewide distribution and wholesale relationships with more than 100 dispensaries.
What to watch out for
But its expansion may not come without competition. Green Thumb Industries (GTBIF -6.82%), also in the process of building a presence in Virginia, is making acquisition moves of its own. It recently acquired Dharma Pharmaceuticals, owner of a vertically integrated license in Virginia, including an operating facility and retail location, along with the potential for five additional retail locations.
In addition to competition brewing in Virginia, Columbia Care competes for market share across the U.S. with top competitors, including Curaleaf Holdings, Tilray, and Trulieve Cannabis, in addition to Green Thumb.
A pawn or a king?
The cannabis market is becoming its own game of chess, where the players are trying to stay a few moves ahead at all times. So far, Columbia Care is taking that approach in stride. It recently acquired a 34-acre cultivation site in New York's Long Island, from which harvest and sales for medical marijuana are expected as early as the fourth quarter of this year, adding to what some estimate to be a $5 billion cannabis market in New York by 2025.
Columbia Care has also taken action to play a key role in international growth as well. In April, the company announced the launch of a proprietary solid-fill cannabis capsule in the U.K. -- the first of its kind in the country.
All of these moves add up to something, and prospective investors might want to know if that something could mean money in their wallets soon. If 2020 is any indication, the outlook is bright. Year-end revenue reached $198 million, up 151% year over year, including a record $81.8 million in the fourth quarter for a sequential increase of 51% and a year-over-year quarterly increase of 234%. The company outperformed its 2020 outlook and now boasts a footprint in 17 U.S. markets, three of which will become operational in 2021, a year during which Columbia Care's guidance suggests it will generate revenue of $500 million to $530 million. If even the lower end of that range is reached, it would mean a second consecutive year-over-year increase of 150% in revenue.
With revenue, gross profit, and gross margin all increasing for the past three consecutive quarters, and a strong 2021 outlook, the upcoming May 17 earnings call -- a first glimpse at whether it may achieve that outlook -- could be just what investors need to make their own moves toward portfolio riches.
