Cannabis stocks like Cronos Group (NASDAQ:CRON) are seeing explosive highs this year. That makes CRON stock and other marijuana plays compelling investments to look at right now.
What’s more, many states — such as Virginia — are already legalizing cannabis. For instance, voters in New Jersey and Arizona decided to legalize the drug for adult recreational use while states like Mississippi have voted to legalize it for medicinal use. Now, there’s speculation that we could see federal legalization sometime in the near future.
So, it’s no wonder that cannabis stocks are hitting all-time highs. Here are some examples:
- Canopy Growth (NASDAQ:CGC) just ran from $25 to a high of over $56
- Hexo (NYSE:HEXO) ran from $4.50 to a high of about $11
- Aurora Cannabis (NYSE:ACB) ran from $8 to nearly $19
- Curaleaf (OTCMKTS:CURLF) ran from $12 to a high of over $18
- Aphria (NASDAQ:APHA) ran from $12 to a high of over $32
Lastly, though, Cronos Group exploded from about $7 in early 2021 to a high of $15.83. Of course, it has since pulled back to the $11 level. However, I strongly believe it could run right back to its prior high after catching support.
CRON Stock Could Be One of the Hottest Pot Plays in 2021
There are several reasons to like CRON stock, but one noteworthy point is that the company’s Executive Chairman, Mike Gorenstein, expects it to have lab-grown cannabis in its products by this year. If this happens, it could be a first for the industry. That method of creating products with biosynthesis-derived cannabinoids would come at far less of a cost.
According to Bloomberg contributor David George-Cosh, biosynthesis is “an engineering process similar to brewing beer that can make THC and CBD for pennies on the dollar.”
We’ll get fourth quarter earnings from CRON in late February, but for reference the company did do well in Q3. Cronos beat expectations and had a good amount of cash on hand, too. Earnings per share (EPS) of a 4 cent loss was ahead of expectations for a loss of six cents. On top of that, sales of nearly $11.4 million beat expectations. Finally, the company had about $1.1 billion in cash and cash equivalents.
Investors should also remember that Altria (NYSE:MO) is backing Cronos, too.
In late 2018, Altria invested $1.8 billion for a 45% stake in CRON and a warrant, which gives MO the “right to acquire an additional 10%” of CRON for $1 billion (Page 28). With this, we could see another cash injection into Cronos, or perhaps a buyout offer.
There’s Plenty of Support for Cannabis
CRON stock itself aside, there have also been new positive developments for cannabis. For instance, recent research shows that there have been lower opioid death rates where cannabis is legal. Health Line details the following:
“Researchers found that counties with more legal cannabis dispensaries had lower rates of opioid-related deaths […] Their analysis showed that increasing the number of dispensaries in a county from one to two was linked to a 17 percent drop in deaths due to opioids.”
On top of that, far more Americans are supportive of legalization. Gallup contributor Megan Brenan notes:
“Americans are more likely now than at any point in the past five decades to support the legalization of marijuana […] The 68% of U.S. adults who currently back the measure is not statistically different from last year’s 66%; however, it is nominally Gallup’s highest reading, exceeding the 64% to 66% range seen from 2017 to 2019.”
And lastly, Senate Democrats — including Senate Majority Leader Chuck Schumer (D-NY), Senate Finance Committee Chairman Ron Wyden (D-OR) and Sen. Cory Booker (D-NJ) — are attempting to reform current cannabis laws.
The Bottom Line
So, all said, CRON stock is well-positioned to benefit in the near future.
For one, there’s a good deal of public support for legalization. Moreover, some people in Congress are pushing for reform this year, as are many more states. With all of this, cannabis stocks are rallying to new highs. And should we see further legalization, the sky’s the limit.
In my opinion, Cronos is one of the best ways to trade this story. Not only is it oversold at support, but it could change the industry with its lab-grown cannabis products. Plus, it could see another cash injection from the tobacco giant Altria in the near term.
In short, take a position in CRON stock and just let it ride. It could see significantly higher highs.
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A contributor to InvestorPlace.com, Ian Cooper has been analyzing stocks and options for web-based advisories since 1999.