uploads/2019/08/marijuana-hashish-leaf-flowerpot.jpg

IIPR: Will Its Q2 Earnings Impress Investors?

By

Updated

Innovative Industrial Properties (IIPR) is scheduled to announce its second-quarter results after the market closes on Wednesday. Lately, IIPR has received a lot of attention from investors due to its drastic stock price movement. Notably, the stock has gained 127.8% year-to-date.

IIPR isn’t directly part of the cannabis sector. The company is a specialized REIT that provides real estate solutions to medical cannabis players.

Article continues below advertisement

Analysts’ expectations for IIPR’s second-quarter results

For the second quarter, analysts expect the company’s sales to grow to $8.3 billion compared to its sales of $3.3 billion in the second quarter of 2018. Analysts also expect IIPR’s earnings to grow 73.5% YoY (year-over-year) to $0.30 in the second quarter.

Stock performance

Recently, IIPR was one of investors’ favorite stocks. However, the stock fell 14.4% in July. The company issued approximately 1.3 million common shares to the public. Investors weren’t pleased. Raising additional capital could reduce the value of existing investors’ shares. However, the company raised additional capital to purchase real estate for the cannabis sector. The move would ultimately drive growth for the company. The stock closed 4.5% higher on Tuesday.

Meanwhile, Aurora Cannabis stock closed 7.2% higher on Tuesday. The stock has risen 37.0% YTD (year-to-date). Canopy Growth closed at 3.2%. The stock has risen 20.5% YTD. The S&P 500 Index closed 1.3% higher.

Article continues below advertisement

Peers’ performance

On Tuesday, Aurora Cannabis (ACB) provided an update for its fourth-quarter results. The company expects its revenues to be 100 million–107 million Canadian dollars.

Canopy Growth (CGC) (WEED) is scheduled to report its results for the first quarter of fiscal 2020 on August 14. Analysts expect the company’s sales to grow 17% sequentially to 110 million Canadian dollars. Analysts also expect the gross margin to rise from 15.9% from 22.65% in the first quarter of 2020.

Strategies to improve growth

Being a specialized REIT, IIPR acquires properties to drive growth. The company uses the properties to produce and cultivate cannabis for medical use. On July 29, the company announced that it completed the acquisition of a property in Holyoke, Massachusetts, from Trulieve Cannabis. Trulieve is a cannabis company in the US. Last month, IIPR announced that it acquired a property in Michigan for $4.8 million.

Article continues below advertisement

According to a report from ArcView Market Research, US regulated cannabis sales increased to $8.6 billion in 2017. The figure includes $5.9 billion in medical-use cannabis sales. Legalization of medical marijuana in several states could help overall cannabis sales reach $22.2 billion by 2022. As a result, IIPR’s attempt to acquire more properties could drive the company’s growth.

IIPR’s price coverage

Currently, only three analysts cover Innovative Industrial Properties. According to data from Reuters, two analysts recommended a “strong-buy” for the stock for the next 12 months, while one recommended a “hold.” The target price is $164, which represents a 59% upside potential for the stock.

Read Cannabis Industry: What’s the Next Phase? to learn more.

Stay tuned to find out how IIPR performed in the second quarter.

Advertisement

More From Market Realist