Cannabis assets are out of favor just now, and the company’s latest news didn’t improve the situation.
Innovative Industrial Properties (IIPR -10.51%) released its latest set of quarterly-earnings figures after market hours Wednesday, and investors reacted accordingly on Thursday. Unfortunately, that reaction was negative, with the market pushing the stock’s value down by nearly 11%. The bellwether S&P 500 index, by contrast, landed in positive territory with a 0.7% gain on Thursday.
Third-quarter figures were a buzz kill
Innovative, a highly specialized real estate investment trust (REIT) that focuses on properties used by the cannabis industry, unveiled its third-quarter numbers. These showed that the company earned $76.5 million in revenue for the period, which was down by nearly 2% from the $77.8 million in the same quarter of 2023. It also missed the consensus-analyst forecast of $77.4 million.
Net income also slipped, declining to $39.7 million ($1.37 per share) from the year-ago profit of $41.3 million. Those prognosticators tracking Innovative stock were expecting $1.45 per share. Meanwhile adjusted funds from operations (AFFO), the most-critical profitability metric for REITs, also headed south. It was $64.3 million against the $64.8 million of 2023’s Q3.
In the earnings release, Innovative attributed its revenue decline chiefly to a $3 million drop in rent and property-management fees.
Buying opportunity
Another factor in the Innovative sell-off was timing. The results were posted very shortly after election day, in which several marijuana-legalization initiatives were defeated by voters — most notably in the very populous state of Florida.
For many, cannabis just doesn’t look like a good investment now, but I think this presents a good buying opportunity in Innovative stock. The company is one of the very few marijuana REITs available anywhere, and despite the electoral setbacks, at some point, this country is bound to effectively legalize the drug. I’d seriously consider snapping up some Innovative on the price dip.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Innovative Industrial Properties. The Motley Fool has a disclosure policy.
