Investors have long been reading about cannabis stocks to buy. However, stocks in the sector have largely remained speculative plays. A key reason is regulatory headwinds that have impacted growth. At the same time, cannabis companies have faced sustained cash burn.

However, there seems to be good news on both fronts. At least 40 countries have fully or partially legalized cannabis. Most recently, Germany legalized the adult use of cannabis. In the United States, the reclassification of cannabis as a Schedule III drug is impending. Further, most Americans support the legalization of cannabis at the federal level.

Therefore, as regulatory headwinds wane, it’s a good time to consider exposure to quality cannabis stocks. I must add that some of the best cannabis companies have achieved or are close to achieving EBITDA level break-even. If growth accelerates due to friendly regulations, margin expansion will likely follow.

With these positives, let’s talk about three cannabis stocks to buy for multibagger returns.

Cronos Group (CRON)

Cronos Group (NASDAQ:CRON) is among the most undervalued cannabis stocks to buy for multibagger returns. The cannabis company’s current cash buffer of $855 million is almost equal to its market valuation.

It’s likely that Cronos will use the cash to pursue aggressive organic and acquisition-driven growth in the next 24 months. In fact, Cronos has expanded into new geographies in recent years, including Germany, Australia, and the United Kingdom.

In a recent development, Cronos announced it would provide a $51 million secured non-revolving credit facility to GrowCo (50% ownership) to fund facility expansion. The objective is to address the increased global demand for high-quality cannabis flowers.

For Q1 2024, Cronos reported healthy revenue growth of 30% on a year-on-year basis to $25.3 million. Considering the recent entry into new geographies, revenue growth will likely accelerate, supporting significant upside for CRON stock from undervalued levels.

Tilray (TLRY)

Tilray Brands (NASDAQ:TLRY) stock has been subdued for an extended period. Given the business developments, I believe a strong breakout on the upside is impending.

Last month, Tilray announced an at-the-market program of $250 million. The company intends to use the proceeds to fund strategic and accretive acquisitions in the U.S. and internationally. This is the anticipation of the reclassification of cannabis as a Schedule III drug in the U.S.

It’s worth noting that for Q3 2024, Tilray reported a global cannabis net revenue increase of 33% on a year-on-year basis. However, international cannabis growth for the period was 44%. Recently, Tilray launched Broken Coast EU-GMP-certified medical cannabis products in Australia. The medicinal cannabis segment will likely remain a growth driver, expanding its presence in Europe and emerging markets.

At the same time, Tilray has established itself as the fifth largest craft beer brewer in the U.S. This diversification has helped establish a strong strategic infrastructure for cannabis expansion on possible federal-level legalization.

Canopy Growth Corporation (CGC)

Canopy Growth (NASDAQ:CGC) stock had surged to closing highs of $14.9 towards the end of April. However, a sharp correction has occurred, and CGC stock trades at $7. The downside is a good opportunity to accumulate.

It’s worth noting that at the beginning of the month, Canopy announced an equity offering of $250 million. Dilution is one of the reasons for sharp corrections, in addition to profit bookings after a massive rally.

However, leaving the near-term price action aside, Canopy is positioned for accelerated growth. An important point to note is that Canopy has a strong presence in the German cannabis market. With cannabis legalization in the country, the company is positioned for accelerated growth.

Canopy is also building a presence in the United States in anticipation of friendly regulations. In Q1 2025, Canopy USA initiated the acquisitions of Mountain High Products, Wana Wellness, The Cima Group, and Lemurian. These acquisitions are likely to be completed in the first half of FY2025.

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.