Cannabis beverage stocks are gathering steam as the marijuana legalization debate moves forward. A landmark piece of legislation to federally legalize marijuana will be put forward to a vote in front of the House Judiciary Committee.
This past week, the House passed a $768 billion defense spending bill which includes an amendment protecting banks offering services to state-legal cannabis businesses from the ire of federal prosecution.
With Democrats now in control of all three branches of government, cannabis reform is more likely to go through, leading to a spectacular increase in the stock prices of top cannabis stocks.
All three of the major cannabis ETFs—Amplify Seymour Cannabis ETF (NYSEARCA:CNBS), AdvisorShares Pure Cannabis ETF (NYSEARCA:YOLO) and Cannabis ETF (NYSEARCA:THCX)—have had double-digit one-year returns for the last year.
Considering the broader positive momentum we see in the sector, it makes sense that many cannabis companies are doing so well. However, companies offering cannabis beverages will have a unique advantage over their peers, since it is the most popular CBD consumption technique.
According to a report by Grand View Research, the global legal marijuana market is expected to reach $70.6 billion by 2028. A large portion of this huge market will consist of CBD beverages. That’s why you should have the following three companies on your radar:
Cannabis Beverage Stocks: Tilray (TLRY)
Tilray completed its merger with peer Aphria in May, one of the biggest combinations in the cannabis space.
Before the merger, there were concerns regarding Tilray’s viability as a long-term option in the cannabis space. However, Tilray 2.0 has a better chance of sustainable success in the Canadian cannabis sector and expanding overseas.
The latest earnings release should give you heart. Net revenue was $513.1 million for fiscal full fiscal 2021. Meanwhile, net revenue rose 27% to $513.1 million during the period from $405.3 million in 2020.
Net income came in at $33.6 million for the fiscal fourth quarter ended May 31, comparing very favorably with a loss of $84.3 million in the year-ago period.
Although the situation is unpredictable, there is a feeling that Tilray has survived this crisis, according to Tilray executives.
Now, let’s talk about the company’s cannabis-infused beverage business.
Anheuser-Busch InBev (NYSE:BUD), the world’s largest beer brewer by volume and revenue, has a partnership with Tilray predating the recent merger to produce non-alcoholic, cannabis-infused beverages.
There are several products offered under the joint venture.
In addition, Aphria purchased SweetWater Brewing, one of the biggest craft breweries in America, before the merger. This will add to Tilray’s offerings, leading to tremendous margin growth.
NewAge is known for its line of health drinks, but many may be surprised to know its also involved in the CBD beverage space.
In mid-2017, the Colorado and Utah-based company licensed rights for certain Marley ready-to-drink beverages. The product has sold very well thus far, and the parties involved renewed the licensing agreement.
Apart from the CBD-infused beverages, NewAge is famous for producing drinks for the health-conscious consumer; Búcha Live Kombucha, XingTea, Coco-Libre, TeMana, ‘NHANCED, and others.
Last year was not a great one for NewAge. Fundamentals suffered due to the impact of Covid-19 on North America, China, Latin America, and Europe. Organic growth stalled, and cash burn increased.
A positive was the ARIIX merger, though. The combination adds a new product suite and NewAge a foothold in the Brazilian market, one of the most populous in the world. Combined revenues are expected to be worth over $500 million.
All things considered, if you decide to invest in this one, it has to be for the long term. Although NewAge has a significant international footprint and prospects for margin growth are high, it will take time to recover from pandemic-related woes.
The recent earnings report illustrates this fact. Net revenue was $124 million for the latest quarter, an increase of 98% from $63 million in the year-ago period. Meanwhile, net income finished at $17.4 million, a jump of $26.9 million compared to a net loss of $9.6 million in the prior year.
After a harrowing year, these numbers instill confidence.
Cannabis Beverage Stocks: HEXO Corp. (HEXO)
Canadian cannabis producer HEXO is having a rough time as of late. Last year was brutal because of supply chain issues and temporary store closures, and anyone hoping for sales to improve has been bitterly disappointed so far.
Quarter after quarter, sales and earnings have disappointed this year, even though the world has a better handle on the virus.
HEXO has had to tap the equity markets to finance its operations because of its anemic results. It recently raised $140 million from an offering of 47.46 million units. U.S.-listed shares of Hexo fell by double digits due to the move.
Considering the state of the affairs, it would come as no surprise if the company issues stock again this year to shore up its balance sheet.
However, its adult-use beverage business is certainly a bright spot. Truss CBD USA, a joint venture between HEXO and Molson Coors Beverage (NYSE:TAP), is responsible for operating five beverage brands; Little Victory, House of Terpenes, Mollo, Veryvell, and XMG; which are doing very well.
On the publication date, Faizan 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.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio. Faizan does not directly own the securities mentioned above.