For an extended period, cannabis stocks have remained sideways to lower. Obviously, there were fundamental reasons for this price action. Most cannabis companies have gone through an extended period of cash burn. Further, regulatory headwinds have played a spoilsport. I however expect cannabis stocks to explode in 2024 and there are a few reasons for this view.
First, some of the best cannabis companies have finally arrested the cash burn. Few major cannabis players expect to be free cash flow positive in the coming quarters. That’s a key stock upside catalyst.
Further, it’s expected that even without legalization, the U.S. cannabis market will be worth $72 billion by 2030. Europe also has an attractive medicinal and recreational cannabis market. Companies are positioned for healthy growth even without federal-level legalization.
At the same time, investors can expect 5x to 10x returns in undervalued cannabis stocks in a legalization scenario. With these positives, let’s talk about three cannabis stocks to explode in 2024.
Tilray Brands (TLRY)
Tilray Brands (NASDAQ:TLRY) stock has skyrocketed by 61% in the last month. I believe that there is significant juice in the rally considering the move from deeply oversold levels. There are two reasons for TLRY stock surging higher.
First, the company announced the acquisition of eight beer and beverage brands from Anheuser-Busch (NYSE:BUD). With this acquisition, Tilray commands the fifth largest market share in the craft beer business in the U.S. This diversification is likely to boost revenue growth even as cannabis sales remain subdued.
Further, Tilray reported encouraging numbers for Q4 2023. The company has also provided optimistic guidance for the financial year 2024. The most important point is that the company expected to be adjusted free cash flow positive.
Coming back to the acquisitions in the United States, Tilray has established a strong strategic infrastructure. This will allow the company to make aggressive expansion moves once cannabis is legalized at the federal level.
Cronos Group (CRON)
Cronos Group (NASDAQ:CRON) is another massively undervalued cannabis stock that’s set to explode in 2024. After a correction of 42% in the last 12 months, I believe that the stock is likely to consolidate and trend higher.
One reason to like Cronos is its strong fundamentals. As of Q2 2023, the company reported cash and equivalents of $841 million. Further, with initiatives to streamline the supply chain, the company expects an improvement in cash flows. Overall, Cronos has guided for further increase in net cash position by the end of the year. Therefore, the company has high financial flexibility to invest in organic and acquisition-driven growth.
In terms of the product portfolio, the company’s Spinach brand is a market leader in Canada in the edibles category. Another potential game-changer for the company is medicinal cannabis. In Israel, new regulations have simplified the process for some patients to obtain prescriptions. I believe Cronos is well-positioned to benefit. Further, the company’s medicinal cannabis business has the potential to make significant inroads in Europe.
Curaleaf Holdings (CURLF)
Curaleaf Holdings (OTCMKTS:CURLF) is another name among high-growth cannabis stocks to buy for stellar returns. For Q2 2023, Curaleaf reported revenue and adjusted EBITDA of $339 million and $70 million respectively. Importantly, the company reported a positive operating cash flow of $16 million. As cash flows accelerate, the company’s financial flexibility will swell.
It’s worth noting that Curaleaf is operating in 19 states in the U.S. Further, the company is already present in eight European countries. As the company expands its global footprint, revenue growth is likely to accelerate.
Further, the company’s focus on research and development is a major growth catalyst. Last year, the company launched 171 new products. In July, the company launched Select Briq, which hit $1 million in retail sales in less than two weeks. With R&D boosting the product pipeline, the outlook is positive for the coming years. With CURLF stock having declined by almost 50% in the last 12 months, it’s a good time to accumulate.
On the date of publication, Faisal Humayun did not hold (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.
