IIPR Stock Near Buy Points, But Don’t Light Up Just Yet Investor’s Business Daily

Innovative Industrial Properties (IIPR) is the IBD Stock of the Day. IIPR stock is trying to hold on to a key support level as it hovers around the top of a base and positions itself for an early entry.

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The cannabis-focused real estate investment trust — which buys properties like grow houses and dispensaries from weed companies and leases them back — has helped inject money into a U.S. marijuana industry often cut off from banking services. And in an industry that is just beginning to turn a profit, it is the rare company that has been steadily in the black.

But IIPR stock is struggling to hold key support, and a big factor is the market. A market rally attempt is underway, but for now it’s still a correction.

IIPR Stock Sets Up

Innovative Industrial Properties was down 0.5% to 255.26 in the stock market today. Shares were hovering near the top of a prior flat base with a 253.71 buy point. But they had slipped below their 50-day line.

Early buying opportunities could emerge if the stock breaks past Tuesday’s high of 269.85 or surfaces above a short downtrend that began in mid-November.

IIPR stock is several weeks into a possible new flat base, or base-on-base pattern.

IBD cautions against buying stocks in a market correction. Markets, so far on Friday, appeared to take new inflation data in stride. Consumer prices rose 6.8% in November, the biggest increase since June 1982, amid a squeeze on the world’s supply chains.

IIPR stock has a 97 Composite Rating. Its EPS Rating is 97. The stock has an SMR Rating of A.

Legalization Hopes

U.S. marijuana stocks have slid recently, after hopes of federal legalization, at least for this year, have faded. Enough GOP lawmakers have remained resistant to ambitious reforms proposed by Democrats. Some analysts say the conservative-backed States Reform Act, a decriminalization bill, has slim prospects. The pandemic, and legislation related to infrastructure and safety-net expansion, have taken a greater priority in Washington.

Some big financial firms have also slapped restrictions on trading U.S. marijuana stocks. In the past, the sector has, at times, followed the adage of buying the rumor and selling the news.

But IIPR stock is up 39% this year. Innovative Industrial Properties has grown as more states legalize cannabis — but as federal restrictions keep the U.S. cannabis industry out of more traditional forms of financing. Allowing a REIT like Innovative Industrial Properties to buy up a business’s property gives that business a quick capital infusion — the equivalent, in some sense, to a loan.

As of Nov. 3, Innovative Industrial Properties owned 76 properties across multiple U.S. states. Tenants include big multistate pot producers like Curaleaf (CURLF) and Green Thumb Industries (GTBIF).

IIPR’s third-quarter revenue beat expectations. Funds from operations came up a bit short.

The company faces questions about its future if the U.S. ever fully legalizes cannabis or opens up banking access to the industry. Some analysts who cover IIPR stock have said the company might not be able to charge as high of a rate on its leases to businesses in the cannabis industry. But they say the REIT could still serve smaller, less-established companies.

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