Colorado Cannabis Stock up 137% in 2019 – More to Come?

Colorado Skyline

Colorado is the most successful cannabis market in the United States.

Sales are booming and expected to continue rising. Consumers are happy with safe products at a good price. Business owners are profitable. Politicians have collected more than $1 billion in taxes in five years.

While California’s cannabis industry struggles with over-regulation and high taxes – Colorado has been the shining example of how to successfully launch and manage a recreational cannabis industry.

Colorado’s medical and recreational cannabis markets are flourishing. Sales have steadily grown, increasing more than 200% since launching in January of 2014.

Here is a chart from the Colorado department of revenue.

There are two reasons Colorado’s cannabis industry has been so successful.

#1 – Colorado Issued Plenty of Permits for Dispensaries

When Colorado legalized in 2014, only 30 stores were selling cannabis. By the end of the year, more than 300 dispensaries had opened.

Today, Colorado has almost 3,000 licensed cannabis businesses. Compare that to California – two years after going legal, the state has around 850 licensed dispensaries and around 2,800 unlicensed dispensaries. That means potential consumers cannot purchase legal cannabis in 75% of California’s cities and counties.

Colorado is looking very smart in the way it issued permits, and it has enabled legit small business owners to thrive while crushing the black market.

#2 – Colorado Isn’t Taxing Cannabis to Death

Colorado is a low-tax state, and that also applies to its cannabis industry. Colorado cannabis growers have to pay a 15% tax when their product is transferred from a cultivation facility to a retail store. Consumers also pay a 15% tax.

In California, recent reports have shown that cannabis taxes add up to about 45%. This makes it very difficult for legal, small-business owners to compete with the illegal market, where prices are low because these businesses don’t pay any taxes or have to follow any regulations.

Looking forward, I expect Colorado’s cannabis industry to continue thriving. Colorado continues to let its cannabis industry expand and innovate.

For example, in July, Colorado passed a bill that would legalize cannabis delivery and cannabis tasting rooms. It may take a few years for those markets to prosper, but it sets the stage for more industry expansion.

I am going to share a promising young cannabis company that is cashing in on Colorado’s high-growth cannabis industry.

This company:

  • Is on pace to own and operate 27 cannabis dispensaries in Colorado by the end of 2019.
  • Own and operate 12 cultivation facilities.
  • Own and operate 7 manufacturers of infused products.
  • Continues to build its Colorado portfolio while looking to expand into new states.
  • One of the best performing cannabis stocks of 2019 with shares up 137%.

Medicine Man Technologies (OTC: MDCL) is a promising young cannabis company headquartered in Denver, Colorado.

Medicine Man started out providing cultivation consulting services. Today, Medicine Man is on pace to become one of the largest vertically integrated cannabis companies in the US and Colorado, with an impressive portfolio of cannabis businesses.

Medicine Man has been on a bender, investing more than $100 million to purchase and consolidate a string of cultivators, infused manufacturers, and dispensaries in Colorado.

For example, on September 9, Medicine Man announced the acquisition of four more cannabis dispensaries for $50 million in the largest transaction in company history. These dispensaries are showing big profits. Here are some more details from the press release.

“These four dispensaries to be acquired culminate a tremendous run over the last week in which we announced the planned acquisitions of 22 dispensaries in Colorado,” commented Andy Williams, Co-Founder and Chief Executive Officer of Medicine Man Technologies. “With an estimated 35% EBITDA margin, these retail stores are collectively expected to be some of the most profitable in our portfolio.

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I expect Medicine Man to add more new Colorado locations to its portfolio. I also expect to see Medicine Man expand into new states, reinvesting and borrowing against profits from its Colorado dispensaries.

Medicine Man Shares are up 137% in 2019

With plenty of momentum from the strong Colorado cannabis market, Medicine Man is having a great year. Shares are up 137% in 2019. Despite the impressive gain, shares aren’t even close to overbought. The relative strength index below the price chart is closer to oversold than overbought.

The Big Picture on Medicine Man

Colorado is the most successful cannabis market in the United States. I expect the industry to continue to thrive with new bills passing that set the stage for more expansion.

Medicine Man is investing millions to cash in on that growth. This is a stock to keep your eye on if you want very specific leverage to Colorado.

About the Author

Michael Vodicka is an equity analyst with more than 20 years of experience trading and investing. His research has been featured in some of the industry’s most respected publications. He has been investing and leading investors in the cannabis sector since 2013.