Those who invested early in companies such as Amazon and Netflix and have held their shares for a while are no doubt glad they did. The two tech giants have generated smashing returns in the market over the past 20 years. Both companies still look attractive today, but going downstairs would have been even better.
Unless you have a time machine, this is not an option. Fortunately, there are other emerging companies that could become giants – at least, in their respective industries – and generously reward shareholders in the process. Two of these companies that deserve to be considered are Tandem diabetes care (NASDAQ: TNDM) and Planet 13 Holdings (OTC: PLNH.F).
1. Diabetes care in tandem
When a business strives for long-term success, it helps to be a leader in an industry ripe for growth. This description corresponds to Tandem Diabetes Care. The company is focused on the development of innovative insulin pumps for diabetic patients. Tandem’s crown jewel, the t: slim X2 insulin pump, prides itself on its ease of use and an automatic insulin delivery system (when paired with DexComcontinuous glucose monitoring system G6), among other advantages.
There is no denying the growth opportunities in this market. In the United States, 64% of patients with type 1 diabetes currently rely on painful and multiple daily injections (IDMs) instead of insulin pumps. In other words, if insulin pumps continue to gain ground in the country, there is still a good part of the patient population to be conquered, which is good news for Tandem.
It should be noted that the percentage of the diabetic population is expected to continue to increase. While this is not good news, it does mean that there will be a growing need for products like the t: slim X2.
Tandem continues to increase its turnover at a good pace. In the third quarter, it posted sales of $ 179.6 million, 45% more than a year ago. This is due to the 31,558 pumps shipped for the quarter, an increase of 43% over last year. Tandem ended the quarter with nearly 300,000 customers worldwide.
In the end, the company’s net profit was $ 5.8 million compared to the net loss of $ 9.4 million reported in the third quarter of last year. For the fourth quarter, Tandem is forecasting sales of $ 685 million to $ 695 million, which would represent 37-39% year-over-year growth. In other words, business is going well for the company.
There is more to be hoped for for the future. The company is now aggressively expanding its overseas operations to approximately 110 territories. While these efforts can increase expenses and reduce results in the short term, they are worth it in the long term. An even greater opportunity lies outside the United States, where this market penetration is only 12%.
Tandem also has to face the competition, but it is doing well on that side; about 50% of its consumers have discontinued a competitor’s insulin pump, not to mention new pump users who have discontinued daily injections. Tandem appears to have the tools to deliver excellent returns for many years to come.
2. Planet 13 Holdings
Another long-term lucrative opportunity is the pot market. By some estimates, the industry will grow at a compound annual growth rate of 13.9% through 2026. Planet 13 Holdings takes a slightly different approach than most of its peers in this industry. Like others, the company sells various marijuana products, including cannabis flowers, edibles, vape products, and more.
But he’s also looking to make cannabis shopping more of an experience with his hypermarket, which is strategically located on the Las Vegas Strip. At this entertainment complex, as Planet 13 calls it, visitors can observe the company’s cannabis production process, grab a bite or cup of coffee, and participate in other activities. Planet 13 justifies its approach by the following statistic: 74% of Americans favor experiences over products. That’s why big box stores like the ones it operates in Las Vegas are an integral part of Planet 13’s long-term strategy.
In June, the company opened its second store in Orange County, California. This store is billed as the largest cannabis dispensary complex in California. The company’s blueprint is to open at least eight of these stores in various attractive markets in the United States over the next five years. He also plans to open smaller “neighborhood stores” across the country.
For the third quarter, Planet 13 reported revenue of $ 33 million, an increase of 45% from the previous year. The company is not yet consistently profitable – it recorded a net loss of $ 10.2 million in the quarter compared to net income of $ 0.2 million in the third quarter of 2020. Most companies of pots are currently unprofitable, and this is one thing that makes the industry very volatile on virtually all news. That said, given Planet 13 Holdings’ unique strategy in the cannabis industry as well as the industry’s growth potential, it’s reasonable to be patient with the red ink, at least for now.
The most immediate challenge for Planet 13 – and so many other companies – is the pandemic, which affected foot traffic in its Las Vegas hypermarket in 2020. But the company was able to mitigate losses from the outbreak by taking advantage of curbside pickup and delivery options for its products. As a result, it sailed relatively well last year with revenue up 10.8% to $ 70.5 million.
The first half of this year was again strong. In March, Planet 13 reported sales of $ 9.7 million, a single month record. He broke that record in April and then again in May.
However, the stock has declined in recent months. With the emergence of new variants of the coronavirus in the second half of the year, investors may fear that as the pandemic continues, it will continue to affect the business of Planet 13. But given that the company has already shown that it is can navigate under current conditions, this should not be too much of a concern.
Planet 13’s long-term plan is not guaranteed to work. The company is still looking to establish a stronger presence in the United States. It’s also a fairly small company with a market cap of just over $ 600 million and a stock price of $ 3.15 per share. This makes this marijuana business a bit risky, but the payoff could also be huge, especially for investors getting into the action at current levels.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.