While the recreational cannabis market continues to evolve and mature, there is still reason to be bullish on marijuana stocks and their prospects.
The Alternative Harvest exchange traded fund (NYSEARCA:MJ), which trades under the ticker symbol “MJ,” was the first cannabis-focused ETF approved in the United States.
The fund tracks an index of stocks that are engaged in the legal cultivation, production, marketing and distribution of cannabis products. In the first six months of this year, the MJ ETF is up a healthy 38% at $20.63.
Over the past year, the ETF has risen 59%, outpacing broader stock markets, and while individual marijuana stocks continue to experience highs and lows, analysts remain enthusiastic about the industry’s long-term potential.
Cannabis companies from neighboring Canada, where the drug is legal nationwide for recreational use, continue to lead the way. Here are the three best Canadian marijuana stocks to buy for future upside potential.
Best Marijuana Stocks to Buy: Tilray (TLRY)
Move over Canopy Growth. There’s a new king of the Canadian cannabis market.
Tilray is now bigger than both Canopy Growth and Aurora Cannabis following its recently completed merger with former rival Aphria.
The newly combined company, which continues to use the Tilray name and branding, has annual revenues of $1 billion and a 17% share of the North American retail cannabis market.
Industry observers are expecting big things from Tilray post-merger. Tilray executives say the company’s focus is to boost its sales in the U.S. market, where it sees a huge growth opportunity as more states legalize recreational cannabis.
About 20 states have now legalized the drug for recreational use. Tilray wants to eventually control 30% of the North American cannabis market.
TLRY stock is up year-to-date at around $18 a share. Investment bank Jefferies Group upgraded the company’s shares to “buy” from “underperform” after the Aphria merger officially closed.
Jefferies said the combined companies are a “perfect match” and stating that Tilray has an excellent opportunity to grow its sales in the U.S., Canada and throughout Europe.
Canopy Growth (CGC)
Canopy Growth stock looks like a buying opportunity at its current price of around $24, especially if the company succeeds in turning around its operations and improving its finances.
Many analysts have grown bearish on the former number one Canadian cannabis producer after a string of disappointing quarterly earnings.
In early June, the cannabis producer reported a steep year-end loss after writing off more than $500 million in impairment charges, while its fourth-quarter results fell short of analysts’ expectations.
Canopy Growth reported $148 million in revenue for its fiscal fourth quarter, up 38% from the same period a year earlier but down 3% from its fiscal third quarter as Covid-19 restrictions weighed on the cannabis industry.
On a full-year basis, Canopy Growth reported $546.6 million in revenue, up 37% from a year earlier. However, the company reported a net loss of $616.7 million in the fourth quarter and a year-end loss of $1.67 billion led by steep asset and inventory charges.
Analysts expected $153 million in revenue and a $61.1 million adjusted loss for the fourth quarter.
The struggling company has responded to its financial woes by undertaking several rounds of staff reductions and cost cuts.
Since last fall, Canopy Growth has reduced its global headcount by 1,000 staff and shutdown several Canadian and U.S. production facilities.
In the first half of 2021, CGC stock has declined 8%. The company will likely need to report some positive financial news before the share price finds a bottom.
Investors should look for continued weakness to buy Canopy Growth stock at a discount and hope for a comeback story.
Aurora Cannabis (ACB)
Aurora Cannabis is another Canadian cannabis reclamation project. However, the company appears to be doing the right things to improve its operations and gain market share in the increasingly competitive cannabis space.
In June, Aurora Cannabis announced that it is shuttering unproductive cannabis greenhouses and production facilities in order to achieve cost savings.
The company says it has already achieved $242 million in savings and expects another $64.5 million over the next 18 months.
The cost saving measures come after Aurora Cannabis reported a revenue decline of 25% in its fiscal 2021 third quarter ended on March 31.
Recreational cannabis sales fell 53% and medical cannabis sales declined 17% year-over-year in the quarter.
The medical cannabis sales drop was particularly disappointing as Aurora Cannabis has been a leader in that segment for nearly a decade. Shares of ACB are down 6% year-to-date.
At their current price, Aurora Cannabis stock looks extremely affordable, with room to grow.
Disclosure: On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.