Warren Buffett is a well-known proponent of value investing. The legendary investor waits for the right valuation before making a big plunge. The whole idea is to buy a good business at a great price. Coming to the point of discussion, I believe that it’s a good time to consider some of the best cannabis stocks to buy.
There is no doubt that certain cannabis stocks are already undervalued. However, if there is an opportunity to buy at lower levels, waiting makes sense. With the potential delay in rate cuts, there is likely to be some nervousness in the market related to an economic hard landing. This is likely to translate into a broad-market correction.
I would use this opportunity to consider exposure to some of the best cannabis stocks to buy. With regulatory headwinds waning gradually, there is a strong case for multibagger returns from the sector. Further, some of the best cannabis companies have worked on cost cutting and are profitable at the EBITDA level.
Discuss three cannabis stocks to buy during a correction for robust returns in the next 24 to 36 months.
Curaleaf Holdings (CURLF)
There seems to be an opportunity lost with Curaleaf Holdings (OTCMKTS:CURLF) stock having surged by almost 100% in the last 12 months. I, however, believe that the uptrend will sustain positive business developments. Any intermediate correction would, therefore, be a good entry opportunity for multibagger returns.
For 2023, Curaleaf reported relatively muted revenue growth of 6% yearly to $1.35 billion. For the same period, adjusted EBITDA was $304 million with an EBITDA margin of 23%.
With a presence in 17 states in the U.S. coupled with aggressive European expansion, revenue growth will likely accelerate. Curaleaf believes that 2024 will be a catalyst year for growth. This is the key catalyst for stock upside.
Recently, Curaleaf completed the acquisition of Northern Green Canada. Curaleaf expects to enter new European markets with the company’s EU-GMP certification. Further, Curaleaf plans to enter into the fast-growing markets of Australia and New Zealand. Healthy growth and robust margins will imply an upside of n operating and free cash flow.
Cronos Group (CRON)
Cronos Group (NASDAQ:CRON) stock is another attractive name among cannabis stocks that can deliver 10x or 20x returns in the next five years. CRON stock has witnessed a decent rally of 44% in the last six months. Corrections would be a good opportunity to accumulate.
It’s worth noting that Cronos was in Canada and Israel before 2023. However, last year, the company entered two new markets, Australia and Germany. The focus is on the medicinal cannabis business. With Germany legalizing recreational cannabis, Cronos will likely focus on the country in the coming quarters.
I also like that Cronos has a robust cash buffer of $862 million. This can be utilized for aggressive organic growth or some big acquisitions. If cannabis is legalized at the federal level in the United States, Cronos is likely to make aggressive inroads.
Tilray Brands (TLRY)
Tilray Brands (NASDAQ:TLRY) stock has remained depressed and trades below $2. If there is any further correction in the stock on the back of broad market sentiments, it would be a golden accumulation opportunity.
Earlier this month, Tilray reported Q3 2024 numbers. While it was a mixed package, I remain optimistic about the long-term growth outlook. Tilray reported revenue growth of 30% on a year-on-year basis to $188 million. This was driven by international cannabis revenue growth of 44%. At the same time, the alcohol segment reported 165% year-on-year growth.
For the current financial year, Tilray has guided for adjusted EBITDA in the $60 to $63 million range. However, the company no longer expects to generate positive adjusted free cash flow for the full fiscal year. I don’t see this as a major concern. If international cannabis revenue continues to gain traction (driven by medicinal cannabis), cash flows will swell in the coming years.
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.
