Americans bought billions worth of cannabis in 2021 and legal pot sales could reach $30 billion in 2022. The Canadian cannabis retail market is expanding too. Yet cannabis stocks took a massive beating, and some popular names lost more than 80% of their value last year.
Industry giant Canopy Growth Corp (NASDAQ:CGC) lost two-thirds of its equity value in 2021 despite rising 150% during a marijuana industry stocks rally of late 2020 to early 2021 and doubling during the first six weeks of last year.
Absent federal legalization, U.S. pot operators continue to report strong sales growth year-over-year. However, their valuations took a nosedive as investor optimism about federal legalization waned off during the year. It’s expected that cannabis reform in America could significantly improve the operators’ business environment, boost their earnings margins and improve cash flows.
Legalization in the U.S. could also open up new growth opportunities for well-funded Canadian marijuana players. Further, Canadian pot stocks could also surge if margin-throttling punitive unit-based excise tax legislation gets revised in 2023.
Therefore, any clarity on the path to federal legalization, or news of tax reforms in Canada could list marijuana stock prices. Increases in investor optimism linked to U.S. legalization efforts historically lifted Canadian marijuana stocks too. A rising tide lifts all boats, and pot industry penny stocks could surge more than their larger counterparts.
Therefore, I’ve screened for cannabis companies with stock prices below $5 a share, and a minimum market capitalization of $200 million to somehow dampen illiquidity risks on the smallest issues. Both U.S. pot stocks and Canadian cannabis names are represented, irrespective of their primary listing.
Before we dig into these stocks, as a reminder: penny stocks are high-risk speculative investments. They usually exhibit high volatility, low liquidity, and sometimes a high prevalence of securities fraud. Extra due diligence is necessary before making any investment decisions. Stop orders are recommended on tickers with low liquidity.
Here’s my list of the best marijuana penny stocks to buy:
- Marimed Inc. (OTCMKTS:MRMD)
- High Tide (NASDAQ:HITI)
- Planet 13 Holdings (OTCMKTS:PLNHF)
- OrganiGram Holdings (NASDAQ:OGI)
- Columbia Care (OTCMKTS:CCHWF)
- Jushi Holdings (OTCMKTS:JUSHF)
- Sundial Growers (NASDAQ:SNDL)
Top Marijuana Penny Stocks to Buy: Marimed (MRMD)
Marimed Inc. is one of the most promising high-quality marijuana penny stocks to buy before investor optimism returns to the cannabis industry.
The company is a multi-state cannabis operator in the United States selling its brands in six U.S. states, and Puerto Rico. Its stock price surged 550% between November 2020 and mid-February 2021 as investor enthusiasm returned to the cannabis industry stocks. Shares have retained most of the gains to this day.
Marimed’s latest quarterly sales of $33.2 million showed a strong 147% year-over-year growth from comparable sales a year ago. Unlike its slow-growth Canadian peers, the company averaged a strong 110% sales growth rate over the past three years. Wall Street’s sales growth estimates for 2022 hover around 21.9% for the year. Growth still abounds.
Most noteworthy, Marimed is a profitable marijuana penny stock to buy. The company has reported positive profits and growing cash flow from operations. It is less reliant on new equity or debt funding which limits dilution risks for its equity investors. The company holds little long-term debt on its balance sheet.
Post its recent product launch in Delaware through a licensing agreement with First State Compassion Center, Marimed has access to a new market and a new growth opportunity.
Marimed stock had an average trading volume of 591,132 shares over the past three months. It has decent liquidity but investors could still feel better using stop orders on trades.
High Tide (HITI)
Canadian marijuana retailer High Tide is another marijuana penny stock that exhibited a strong propensity to violently react to bullish market sentiment towards marijuana stocks last year.
HITI stock soared by 275% between Nov. 1, 2020, and Feb. 9, 2021, as investor enthusiasm gripped marijuana stock traders. Speculation on potential federal legalization during President Joe Biden’s term pushed pot industry names high at the time. Shares retain some of the gains to date with a 142% increase in High Tide stock since then.
Interestingly, revenue projections for High Tide in 2022 show a potential 90% increase in sales this year. Losses should narrow as the company draws closer to positive normalized earnings in 2023. A pro-investment thesis on the marijuana penny stock High Tide seems supportable right now.
Investors looking to buy the cannabis stock could channel orders to the NASDAQ where the three-month trading volume averaged 182,286 shares as compared to 77,420 shares on the Toronto Venture Exchange (TSXV).
Top Marijuana Penny Stocks: Planet 13 Holdings (PLNHF)
Nevada-based cannabis grower and dispensary operator Planet 13 Holdings stock price soared by 147% during a November 2020 to mid-February 2021 general rally in cannabis stocks. It took a full year for shares to finally give up the amassed gain in valuation, however, another rally could happen if optimism returns to the marijuana industry again.
Planet 13 Holdings generated $140 million in revenue during the past twelve months and had a healthy cash balance heading into the fourth quarter of 2021. Analysts expect the company to grow its revenue by 23% to 54% for 2022 following a projected 74% to 110% growth in 2021.
The company is buying Next Green Wave Holdings for 91 million CAD ($70.3 million) to create a backbone for its concentrated focus on California with plans to expand into Florida and Illinois in the near future.
A bullish management team registered the company’s common stock with the Securities and Exchange Commission (SEC) in January in preparations to up-list to a major U.S. stock exchange upon federal legalization of marijuana business operations in America. The company is getting prepared for a post-legalization era that could propel its business into new growth frontiers. Shareholders could ride the wave to triple-digit capital gains.
The average trading volume in Planet 13 stock over the past three months has been 521,805 shares on the U.S. OTC Markets (OTCMKTS). Therefore it exhibits decent liquidity. Stop orders are still encouraged when trading this volatile marijuana penny stock to limit trading risks.
Organigram Holdings Stock (OGI)
OrganiGram Holdings is a Canada-based low-cost marijuana producer which a growing export market. The company recently announced the highest quarterly net revenue ever this month as operations generated a 57% increase in cannabis net sales to 30.4 million CAD ($23.8 million) for the quarter ended in November 2021.
Recent revenue growth was also accompanied by a recovery in gross margins, narrower operating losses, and a near breakeven net loss as the company maintained its number four position in Canada by market share. Organigram estimates a 7.5% market share in the Canadian cannabis market, up from 4.4% exit 2020.
A strategic investment from tobacco giant British American Tobacco (NYSE:BTI) last year boosted OrganiGram’s liquidity position and allows the company to pursue growth opportunities.
Most noteworthy, OGI stock price rallied 354% during the pot stock trading frenzy of late 2020 to early 2021. OrganiGram shares traded below $1.50 per share at the time of writing to qualify OGI as a marijuana penny stock to buy before optimism returns to the cannabis industry.
A three-month average trading volume of 6,027,689 shares on the NASDAQ compares well with 1,699,191 on the Toronto Stock Exchange in Canada. Liquidity isn’t a concern with this stock.
Top Marijuana Penny Stocks: Columbia Care (CCHWF)
Columbia Care is an American medical and recreational marijuana grower, manufacturer, and retailer with a growing footprint in 18 U.S. jurisdictions and a European presence.
The company is expanding its already expansive Cannabis dispensaries count in 2022, including targeted five store openings in West Virginia and new licenses in New York.
Columbia Care’s double-digit historical revenue growth rates have been impressive and the reported surge in operating earnings during the third quarter of last year could set the stage for profitable quarters ahead.
Shares soared nearly 99% during a period of bullish sentiment on marijuana legalization in late 2020-to February 2021. The gains are all gone today but the stock has outperformed the S&P 500 by some wide margin so far in 2022.
Any return of positive sentiment to marijuana names in 2022 could lift Columbia Stock much higher and out of marijuana penny stock territory this year.
The three-month average trading volume of near 500,000 shares on the OTCMKTS depicts reasonable liquidity for small retail investor trades.
Jushi Holdings (JUSHF)
Jushi Holdings is a vertically integrated multi-state cannabis and hemp producer and retailer with operations spread across the United States that are worth your attention. The business is in high growth mode and recent product launches in Massachusetts could sustain that trajectory.
Most noteworthy, the company is running a promisingly and sustainably profitable marijuana business after reporting positive and growing adjusted earnings before interest, taxes, depreciation, and amortization expenses (adjusted EBITDA) over several successive quarters. Management’s $21-$25 million adjusted EBITDA outlook for 2021 increases to $110 – 130 million for 2022.
Jushi Holdings stock experienced an impressive 198% rally between November 1, 2020, and February 9, 2021, when talk of potential federal legalization in America ignited a wave of investor optimism in marijuana stocks. Shares have gained 15% so far this year and could surge some more if enthusiasm grips pot investors at any point in 2022.
A three-month average trading volume of 337,625 on the OTCMKTS still seems liquid enough for nimble purchases and small sell transactions.
Top Marijuana Penny Stocks: Sundial Growers (SNDL)
Sundial Growers stock is arguably the best speculative marijuana penny stock play if one is betting on a return of investor optimism to the cannabis industry. A pure meme stock of the past year, SNDL stock commands a significant social following and it should be among the first pot names to benefit from a boost in trader sentiment.
Sundial Growers stock surged 1,948% during the November 2020 to Mid-February 2021 marijuana meme stock rally. The move allowed management to raise new equity and pivot into investment operations, a move some traders likened to emulating of investing legend Warren Buffett’s Berkshire Hathaway (NYSE:BRK-A, BRK-B) investments portfolio.
A recent acquisition of liquor store operator Alcanna could boost cash-generating capacity. However, the core business remains under margin pressure.
Interestingly, another sentiment increase is what SNDL stock needs to lift its share price from a current $0.50 – $0.60 trading range to avoid either a delisting from the NASDAQ or a share consolidation.
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On the date of publication, Brian Paradza 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.
Brian Paradza is an investing enthusiast who was awarded the CFA Charter in 2019. A strong believer in fundamentals-based long-term investing, Brian learns from gurus like Warren Buffett but acknowledges human behavioral tendencies that drive short-term “madness”. You may find him inquisitive as he examines tech investing opportunities, cannabis, blockchains, and the new cryptocurrencies asset class.