Cannabis stocks can deliver potentially very lucrative returns. After all we are on the brink of a massive market opportunity. For instance, a new report by Grand View Research reveals that the global legal marijuana market size is expected to reach $66.3 billion by the end of 2025.
Meanwhile there are also several exciting bio stocks to consider. An active ingredient in cannabis, cannabidiol (CBD), has already demonstrated positive effects in the central nervous system. And CBD is both non-euphoric and non-addictive.
Here I delve down into five top cannabis stocks to buy. As you will see the Street is predicting significant gains for each of these stocks. In fact, four out of five of the stocks covered below have received only buy ratings in the last three months. Here’s why the Street is so bullish right now:
Cannabis Stocks to Buy: GW Pharma (GWPH)
Another quarter, another big beat for cannabis stock GW Pharmaceuticals (NASDAQ:GWPH). The biopharma has just revealed that sales of its Epidiolex drug topped Street expectations by over 50% ($68 million vs. $44 million) and doubled Q1 ($34 million).
GWPH recently launched Epidiolex, its flagship product, in the U.S. for congenital seizure syndromes known as Dravet and Lennox-Gastaut Syndrome. Given the drug’s favorable efficacy/safety profile, the significant unmet need, and positive physician feedback, investors had every reason to be hopeful. But GWPH still managed to surprise to the positive.
Epidiolex launched flying as high as a kite, celebrated JP Morgan’s Cory Kasimov. “Though many investors we spoke to pre-quarter were talking a $50M-$55M number, we certainly weren’t expecting something approaching a 7-handle” the analyst admitted. He has just reiterated his GWPH buy rating while ramping up the price target from $214 to $232 (over 50% upside potential).
Plus, near-term label expansion opportunities (Tuberous Sclerosis) and the potential for off-label use in the broader population of general epilepsy patients could contribute significantly to the top line, says the analyst.
Net-net: “With a continued strong US launch, an EU approval in October, and TSC set to come online in mid-2020 (not to mention the potential for future off-label use), we believe there is still plenty of room for shares to continue to appreciate.” In fact, the stock shows a 100% unanimous buy rating from the Street. That’s with a $222 average analyst price target. Interested in GW Pharma stock? Get a free GWPH Stock Research Report.
Aurora Cannabis (ACB)
Canadian cannabis producer Aurora Cannabis (NYSE:ACB) is a riskier proposition. But if the bulls should win the day, then the rewards could be substantial. For instance, the Street’s average price target of $8.68 indicates 48% upside potential from current levels. Best-performing analysts even have a slightly more bullish average price target of $9.46 (62% upside potential).
By bringing industrial scale to their growing facilities, ACB can lower the average cost significantly. For larger facilities “like Aurora Sky and Aurora Sun, the production costs per gram are expected to be under $1 once the space is fully functional,” Ladenburg’s Glenn Mattson noted. The analyst recently initiated ACB coverage with a buy rating and $9 PT in July.
And as Mattson points out, “While some firms are being cautious about expansion with the possibility that the Canadian market may see oversupply, Aurora is taking the view that the market for cannabis will be global and it can export to areas like Europe if the Canadian market sees saturation.”
However there are hurdles to overcome. I’m looking at you, cash burn. “Aurora has emerged as one of the best operators in the cannabis sector, with industry leading scale and margins… and global optionality,” accepts Merrill Lynch analyst Christopher Carey. But “it is burning cash and by our estimates could be cash negative by CQ120 (absent financing), namely if a large convertible debenture due in CQ120 stays out of the money.”
As a result, Carey downgraded ACB from Buy to Hold in July. Overall the Street consensus for Aurora stands at a cautiously optimistic Moderate Buy. Get the ACB Stock Research Report.
OrganiGram Holdings (OGI)
OrganiGram Holdings (NASDAQ:OGI) is a leading Canadian licensed producer of high-quality medical and recreational cannabis. Even though the company has just reported disappointing earnings results, analysts are staying firmly on side.
Take GMP FirstEnergy analyst Justin Keywood. He notes that results missed most estimates, with soft Q3 sales partly due to a temporary change in growing protocol. However OGI managed costs well with positive EBITDA. And the analyst expects sales to improve in Q4 and beyond. That’s as capacity expands and new derivative products come to market.
“We see advantages in OGI being strong operators and prudent cost managers with a balance sheet to support expansion plans. We see these qualities as unique in the cannabis industry at this early stage that derisks the investment case to a certain degree,” says Keywood.
He has just reiterated his buy rating on the stock with a C$12.50 price target. For reference the stock’s U.S. listing has an average price target of $12 (135% upside potential). That’s with six back-to-back buy ratings in the last three months. So thumbs up all round.
“Although we have adjusted our forecasts to reflect more conservatism, a compelling value proposition still exists with OGI valuation at 14x C2020 EBITDA, below peers at 20x” the analyst explained. Get the OGI Stock Research Report.
KushCo Holdings (KSHB)
KushCo Holdings (OTCMKTS:KSHB) is one of the fastest-growing cannabis affiliated companies. The company operates a sales and distribution platform to both businesses and consumers that provides packaging, supplies, vaporizer products as well as branding services. Most recently KushCo’s FQ3 results revealed strong top-line growth and a significantly improving margin profile.
Now KushCo is prepping for a likely up-listing on the Nasdaq stock exchange. This should act as a near-term catalyst for KSHB, as it will certainly raise the company’s profile and boost liquidity.
Roth Capital analyst Scott Fortune states: “We believe the recent pending application for a NASDAQ uplisting will be approved in the coming months and will result in increased shareholder value. In our opinion, institutional money entering the space will benefit KSHB as one of the few U.S. located cannabis-involved companies listed on an U.S. exchange.”
He has just reiterated a Buy rating and $8 price target on KushCo. From current levels that suggests shares can surge over 100%. Bear in mind, the Street is just as optimistic about this cannabis stock’s growth potential. KushCo shows a ‘Strong Buy’ analyst consensus and a $7.63 average price target (99% upside potential).
“We continue to believe that KSHB is on the right path to becoming the most trusted and reputable packaging and product supplier to the rapidly growing cannabis industry” enthuses Northland Securities analyst Greg Gibas. “Therefore, we believe KSHB offers an attractive investment opportunity for small cap growth and cannabis related investors.” Get the KSHB Stock Research Report.
Zynerba Pharma (ZYNE)
Biopharma Zynerba Pharmaceuticals (NASDAQ:ZYNE) is developing next-generation transdermal cannabinoid therapeutics. Using this non-euphoric CBD, Zynerba wants to improve the lives of patients affected by rare neuropsychiatric conditions. All four analysts covering ZYNE rate the stock a ‘Buy.’
That’s thanks to lead product candidate, Zygel. This is the first permeation-enhanced CBD gel for delivery through the skin and into the circulatory system. The drug has already displayed promising potential for Fragile X syndrome (FXS) and Autism (ASD).
Ladenburg analyst Michael Higgins has just reiterated his buy rating on ZYNE with a $26 price target. That indicates shares could more than double from current levels. “Unlike prior years, Zynerba is heading into a period with a series of pivotal and proof-of-concept data with a strong balance sheet, yet just 26.0 million fully-diluted shares outstanding as of mid-2019, which should in our view support a stronger than expected increase in its stock before October,” cheers the analyst.
And get your diaries outm because a key date is fast approaching. Positive DEE data in September could prove a major catalyst for shares. This is a trial for seizure reduction in rare developmental and epileptic encephalopathies (DEE).
As Higgins writes: “We remain eager to see September’s Phase 2 results from Zynerba’s leading asset (Zygel; synthetic cannabidiol gel) in ~50 3-to-7-year old kids with DEEs.” He tells investors that a 20% or greater improvement would be clinically meaningful. Get the ZYNE Stock Research Report.
TipRanks offers investors the latest insight into eight different sectors by tracking the activity of over 5,000 Wall Street analysts. As of this writing, Harriet Lefton did not hold a position in any of the aforementioned securities.