Marijuana stocks have been trading higher recently, after Senate Majority Leader Chuck Schumer proposed draft legislation to legalize cannabis at the federal level. Schumer feels that by next year, the country will have made meaningful progress in decriminalizing the substance. As a result, U.S. pot stocks could be looking at a big breakthrough in 2022. Hence, it would be prudent for investors to scoop up the most promising marijuana stocks before they take off.
More specifically, Schumer introduced The Cannabis Administration and Opportunity Act, which would “remove cannabis from the Controlled Substances Act.” Additionally, it would introduce regulations to tax cannabis products and “expunge federal records of nonviolent cannabis offenders.” If Schumer’s plan goes through, the U.S. Food and Drug Administration may have authority over marijuana regulation in the future.
This year, marijuana sales are expected to grow by 40% on a year-over-year (YOY) basis to $24 billion in the States. With cannabis already legalized at multiple state levels, you can expect that number to rise exponentially next year. And when pot becomes fair play on the federal level? Who’s to say how much sales will grow.
So, all told, let’s look at seven of the best marijuana stocks to invest in ahead of federal legalization in the United States.
- Curaleaf (OTCMKTS:CURLF)
- Green Thumb Industries (OTCMKTS:GTBIF)
- Trulieve (OTCMKTS:TCNNF)
- Cresco Labs (OTCMKTS:CRLBF)
- Hexo (NYSE:HEXO)
- Village Farms International (NASDAQ:VFF)
- Tilray (NASDAQ:TLRY)
Best Marijuana Stocks to Buy: Curaleaf (CURLF)
Curaleaf is the largest multi-state operator in the United States, with operations in 23 states and 106 dispensaries. The company has captivated investors with its aggressive growth strategy and stellar fundamentals. It has also performed incredibly well in the past year, with revenue growth estimates at over 107% year-over-year (YOY). Yet, despite its spectacular performance, CURLF stock trades at just 7.02 times forward sales.
This company started the year off with a bang, posting eye-catching numbers in its first-quarter results. For one, Curaleaf saw triple-digit top-line growth, with revenues growing 170% on a YOY basis and 213% for adjusted EBITDA. Moreover, it ended the quarter with a healthy $315 million in cash and just $340 million in debt.
CURLF is undoubtedly in the top tier of cannabis operators in the country. The company continues to expand its presence in more territories, making it an attractive pick among marijuana stocks.
Green Thumb Industries (GTBIF)
Next up on this list of marijuana stocks, Green Thumb Industries is a leading name in the cannabis consumer packaged goods industry. The company has operations in 12 states and runs 56 retail stores.
Despite the pandemic-induced weaknesses, this company also delivered significant consecutive quarterly growth for its top-line last year. Now for 2021, Green Thumb has kept the momentum going. In fact, GTBIF stock is in for an even better year.
Green Thumb reported sales of $194.4 million for Q1 2021, representing an 89.5% improvement from the prior-year period. Moreover, adjusted EBITDA rose 179.3% on a YOY basis to $71.4 million.
But that’s not all — this company is set for significant gains off the launch of recreational cannabis in markets like New York, Virginia and New Jersey. It also acquired Dharma Pharmaceuticals to offer a cultivation facility and a dispensary to the Virginia market. All of these developments have boosted its future revenue estimates exponentially.
Best Marijuana Stocks to Buy: Trulieve (TCNNF)
Trulieve is arguably one of the best performing marijuana stocks to invest in at this time. With YOY revenue and EBITDA growth numbers exceeding 90%, it’s tough to pass up on TCNNF stock. The company owns assets in six states, the majority of which are located in Florida where it holds almost 50% of the medical cannabis market.
For Trulieve, the near future involves geographical diversification. The company recently announced that it was acquiring another cannabis company, Harvest Health and Recreation. Harvest has a sizeable presence in the Arizona market and will complement TCNNF’s position in Florida. What’s more, both companies posted a handsome EBITDA profit in their first quarters and have grown their top lines incredibly in the past few years.
All in all, this company is well on track to expand and hit $1 billion in revenue.
Cresco Labs (CRLBF)
Next up for the marijuana stocks is Cresco Labs, a budding multi-state operator that is among the top wholesalers in the sector. Cresco had an unbelievable 2020, with revenues growing by roughly 273% on a YOY basis for the full year. Moreover, Cresco’s focus on branding gives it an edge over the competition. Yet, despite its stellar performance, CRLBF stock trades at just 4.24 times forward sales.
Cresco recently released Q1 results, where its revenues rose by an incredible 168% to $178 million. Moreover, its adjusted EBITDA shot up 507% to $35 million. Now, Cresco is looking at annualized revenue run-rate of over $1 billion by the end of 2021. Plus, it expects its gross margins to exceed 50% for the remaining three quarters.
Lastly, Cresco Labs has been highly active on the merger and acquisition front as well. For one, it announced the acquisition of Florida-based Bluma Wellness for $213 million. It also purchased Massachusetts-based Cultivate as well Ohio-based Verdant. These acquisitions will increase its footprint across the country and should soon lead to higher sales.
Best Marijuana Stocks to Buy: Hexo (HEXO)
If U.S. federal legalization goes through, it’s not just American cannabis companies that will benefit. Instead, Canadian marijuana stocks should benefit from full legalization as well.
As you may know, the lack of a uniform policy in the U.S. has been a massive hurdle for Canadian producers trying to doing business across the border. And among those top Canadian producers? Hexo.
Like other pot plays on this list, Hexo has had an impressive growth strategy and boasted solid top-line numbers. It even bought the recreational and medical marijuana producer Redecan, giving it one of the larger market shares in Canada.
Hexo had a strong showing in 2020, despite the pandemic. Revenues grew by double digits on a YOY basis for the year. Of course, sales did take a hit in the most recent quarter due to strain cultivation decisions and production troubles. However, HEXO stock is in an overall good position. The business should expand at an even better pace this year.
Village Farms International (VFF)
Village Farms is not exactly a marijuana pure-play. Rather, it runs a successful produce business selling peppers, cucumbers and tomatoes in North America. However, with VFF’s recent acquisition of Canadian cannabis producer Pure Sunfarms, the company has now forayed into the arena of marijuana stocks.
Village has plans to double its marijuana cultivation capacity in 2022, hoping to expand to 2.2 million square feet. Hence, VFF stock has the potential to make a significant splash in the cannabis industry in the next couple of years.
Pure Sunfarms also has an incredible track record of generating profitability. Moreover, its retail branded sales have grown well. So, this acquisition should complement Village Farms nicely and help grow its retail footprint.
True, Village Farms has had a rough time during the pandemic, but lately it’s seen nice revenue growth. Now, the company is poised for a strong showing this year. Forward revenue growth estimates are well over 20%.
Best Marijuana Stocks to Buy: Tilray (TLRY)
Last up on this list of marijuana stocks, Tilray recently had its blockbuster merger with Aphria, making it the largest marijuana company by revenue. The company also has a top share in Canada’s $2.6 billion marijuana market. Additionally, Tilray has a robust international presence in countries such as Germany, Israel and Portugal. It is also building a robust supply-chain network in the States. TLRY stock has generated a healthy 89% return in the past 12 months.
Tilray is stable from a financial standpoint. However, its recent performance has been far from noteworthy. As such, it will be interesting to see how the combined entity performs once it releases its next earnings results. The company’s partnership with beer maker Anheuser-Busch (NYSE:BUD) could pay dividends down the line as well.
The two companies have launched a joint venture called Fluent in order to develop beverages for the Canadian market. These kinds of developments could certainly lift TLRY stock higher in the coming years.
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On the date of publication, Muslim Farooque 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
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.