This article was originally published on Fool.com
You wont find a lot in common betweenAurora Cannabis(NYSE:ACB)andMariMed(NASDAQOTH:MRMD). They both operate in the cannabis industry, but they differ in multiple ways, including geographical focus, size, and stock performance.
On the last category, MariMed has been the clear winner so far in 2018. Itsstock has more than quintupled while Auroras share price is close to where it started the year.
But which of these two marijuana stocks is the better pick for investors now? Heres how Aurora Cannabis and MariMed stack up against each other.
The case for Aurora Cannabis
There are three key arguments for buying Aurora Cannabis stock:
- The global marijuana market is going to be huge.
- Aurora has the production capacity to be a major player in this market.
- Aurora has the distribution channels to be a major player in this market.
Lets look at each of these arguments in more detail.
Is the first statement true? It depends on what you think huge means. Regardless of the measuring stick you use, the global marijuana market appears to be on course to expand dramatically.
Arcview Market Research and BDS Analytics project the global marijuana market will reach $32 billion by 2022, more than triple the markets size last year.Some industry participants project that the global marijuana marketwill grow much largerthan that over the next 15 years. A market size of $150 billion is on the low end of these projections.
The second key argument for Aurora isnt as subjective. Aurora expects to have an annual production capacity of 150,000 kilograms (330,693 pounds) by the end of this year. It will be able to grow more than 500,000 kilograms per year by the middle of 2019, making Aurorathe largest marijuana grower in terms of capacity.
What about Auroras distribution channels? The company appears to be in good shape in the Canadian recreational marijuana market. Aurora claimssupply agreements with nine provinces that together are home to 98% of Canadas population.
Auroras international distribution channels seem solid as well. Germany ranks as the most important of these international markets. The companys Aurora Europe subsidiary is based in Berlin and is spearheading efforts to supply medical marijuana to several European markets. Aurora is also active in other countries, including Australia, the Cayman Islands, Colombia, and Malta.
Theres also the possibility that Aurora could significantly expand its distribution channels by partnering with a major company outside of the cannabis industry. The company has reportedly been involved indiscussions withCoca-Colaand is widely viewed as one of the top candidates to bea potential partner forDiageo.
The case for MariMed
Since we looked at three key arguments for buying Aurora Cannabis, lets take the same approach for MariMed. Probably the three main reasons to buy MariMed stock are:
- The U.S. marijuana market is where the most money is being made.
- MariMed is one of the best-positioned companies in the U.S. marijuana market.
- MariMed has significant potential for growth.
The first statement is indisputable. Of the $32 billion that Arcview Market Research and BDS Analytics project in global marijuana sales for 2022, most of it $23.4 billion will be generated in the U.S.
Its also hard to argue that MariMed isnt one of the best-positioned companies in the U.S. marijuana market. MariMed develops medical cannabis production facilities that it leases to customers. It alsohelps marijuana-related businesses in the U.S. obtain state licenses. In addition, the company markets its own brands of cannabis products.
MariMed has seen its sales skyrocket as medical marijuana markets begin to mature in the five states where it operates. Investors have recognized the companys potential, with MariMed rising quickly to become thethird-biggest U.S.-based marijuana stock.
And MariMed appears to have tremendous growth prospects. One of the five states where it currently has operations Massachusetts is likely to becomeone of seven states with cannabis markets exceeding $1 billion annuallyby 2022. The company is also planning to expand intoPennsylvania, New Jersey, Michigan, Florida,and Ohio. Together, these additional states should claim total annual marijuana sales of close to $4 billion by 2022.
Better marijuana stock
The cases for both Aurora Cannabis and MariMed seem to be fairly solid. So which is the better marijuana stock?
Auroras market cap is currently 10 times larger than MariMeds. But Aurora cant currently compete in the U.S. the worlds largest marijuana market. MariMed can. My view is that these two factors make MariMed the better stock right now.
However, marijuana remains illegal at the federal level in the U.S.MariMed faces the risk of a potential crackdown on cannabis-related businesses. It also could see increased competition.
While Id give MariMed the nod over Aurora Cannabis, I wouldnt call the stock a definitive buy at this point. There are other marijuana stocks that, in my opinion, present even better risk-reward propositions.
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