Marijuana legalization may be inching closer in the U.S. but it just became a reality in Germany. As of April 1, Germans can now legally grow up to three marijuana plants for personal use. They can also possess up to 50 grams at home and up to 25 grams in public.
Starting July 1, people will be able to buy marijuana at not-for-profit clubs. The clubs will be limited to 500 people and members can only consume the cannabis the club sells. Marijuana will still be illegal for minors, around schools and near playgrounds.
Because Germany is Europe’s largest economy, marijuana legalization will set the tone for other countries expected to follow its lead. Cannabis companies are ready to capitalize on the opportunity but some are ready to hit the ground running. That’s because they already have a presence in Germany providing medical marijuana, which has been legal since 2017.
For that reason, the following three cannabis stocks stand positioned for an early lead. But pot stock investors should still be cautious. Canada’s marijuana legalization efforts showed just how royally screwed up the government can make the opportunity.
Tilray Brands (TLRY)
Tilray Brands (NASDAQ:TLRY) is arguably the best-positioned cannabis stock in Germany. Its European offices are headquartered in Berlin and the company has operated in the country since 2016. It currently serves the German medical marijuana market, which is the largest in Europe.
Even more exciting, Tilray has the largest market share by revenue of any marijuana company in Germany and already has a sales team on the ground. Its distribution arm, CC Pharma (also known as Tilray Pharma) can distribute medical marijuana to 13,000 pharmacies in the country. Tilray also has production facilities in Portugal and Canada and exports marijuana to Germany.
Tilray projects a fivefold increase in marijuana cultivation under legalization leading to revenues doubling. TLRY stock jumped from $1.60 per share ahead of legalization to around $3 per share afterward. But it immediately crashed again and now trades below $1.80 per share. As the best cannabis stock to buy for German legalization, this is a good deal.
In short, Tilray is the No. 1 cannabis stock because it has all the infrastructure in place. Though personal marijuana consumption grabs the headlines, the medical marijuana market is still a real opportunity.
Canopy Growth (CGC)
Once one of the biggest cannabis stocks after Canada’s legalization, Canopy Growth (NASDAQ:CGC) has fallen to a middling size with a $722 million valuation. It stands ready, however, to enjoy significant growth from Germany where it has operated for years.
Like Tilray, it supplies the medical marijuana market and will benefit from many of the same forces that will push its rival higher. Canopy, though, has just as good of a chance of winning in the personal use space, which can multiply the leverage legalization provides.
Canopy Growth acquired the global leader in vaporizers, Storz & Bickel, in 2018. Its Volcano device is hailed as “one of the greatest cannabis consumption devices on earth” by the International Cannabis Business Conference. Its manufacturing facility is located in Tuttlingen, Germany. Canopy generated $64.8 million in revenue from Storz & Bickel in fiscal year 2023 with gross margins of 40%. In the third quarter of fiscal 2024, the brand generated $18.5 million in sales, down slightly from the year-ago period but up 54% sequentially. It also posted gross margins of 51% as a new vaporizer product, Venty, had the most successful product launch in the brand’s 20-year history.
Aurora Cannabis (ACB)
The third cannabis stock poised to pop on Germany’s legalization law is Aurora Cannabis (NASDAQ:ACB). It is one of the three companies with marijuana cultivation permission in Germany. Aurora also owns state-of-the-art production facilities in Germany that have received good manufacturing practices (GMP) certifications from European regulators. It can produce 1,000 kilograms of medical marijuana annually.
Aurora prides itself on the new cultivars it develops, pointing specifically to the Farm Gas and Sourdough flower cultivars that deliver super-high quality tetrahydrocannabinol (THC) to the medical marijuana market in Germany and Australia. Its Pedanios brand is one of the leading medical cannabis brands.
While it will benefit from legalization in Germany through the expansion of the medical marijuana opportunity like the others, Aurora Cannabis has a firm foothold across Europe. As more countries follow Germany’s lead, the cannabis stock stands to benefit from its long-established presence as it was one of the first Canadian marijuana companies to position itself on the continent.
On the date of publication, Rich Duprey 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.
