Undervalued cannabis stocks may be some of the most controversial trades on the market.
But they’ve also proven themselves to be some of the most profitable.
This all comes thanks to rescheduling efforts, a greater number of Americans wanting to see approval and the potential for even more positive news ahead of the elections. We also have to consider that Florida could soon legalize its use. All of which could easily send cannabis stocks to higher highs.
Look at Innovative Industrial Properties (NYSE:IIPR), for example.
The cannabis real estate investment trust (REIT)—which carries a yield of about 6.73% — saw its stock rocket from a February low of about $90 to a recent high of $115.75. Even now, it still offers a substantial amount of opportunity.
Better, with the story heating up, here are three of the most undervalued cannabis stocks you may want to buy and hold in your portfolio today.
Trulieve Cannabis (TCNNF)
At just $9.21, Trulieve Cannabis (OTCMKTS:TCNNF) could see higher highs as we near potential legalization in Florida. Alliance Global Partners even noted TCNNF is best positioned for that. Analysts at Needham also raised their price target on TCNNF to $14.50 with a “buy” rating. Analysts at Canaccord also raised their price target to $38, with a buy rating.
Plus, should Florida legalize its adult use, the state could see a windfall of $4.5 billion from sales by 2028, says Business Insider. “The state’s medical cannabis sector remains robust, with patient numbers surpassing 878,000 this month and sales reaching $2.6 billion in 2023, marking an 18% increase from the previous year,” this April 26 article added.
Earnings have also been strong. Its first-quarter EPS loss of five cents beat by six cents. Revenue of $298 million – up 4.6% year over year – beat by $12.27 million. It also generated a free cash flow from operations of $139 million and a free cash flow of $124 million.
Curaleaf (CURLF)
Another one of the top undervalued cannabis stocks to buy is Curaleaf (OTCMKTS:CURLF).
For one, it could also benefit from rescheduling and potential legalization in Florida. Two, Alliance Global Partners just raised its price target to $12 on those catalysts. Three, while recent earnings weren’t anything to write home about, that should improve with legalization and its expanded global footprint in Europe following legalization in Germany.
Plus, as I noted on May 16, “The Supreme Court’s decision to allow the legalization of cannabis to appear on ballots this November holds the key to unlocking a potential tripling of the total cannabis market in Florida to $6 billion in sales, as noted by Benzinga.com.”
In addition, as noted by Matt Darin, chief executive officer of Curaleaf, “We are laser-focused on expanding the global reach of our brand portfolio, with Select, Grassroots, Curaleaf and Four20 in Europe leading the way. In the first quarter, our team gained 33 basis points of total market share across all BDSA states, expanding our share in some of the largest markets throughout the U.S.”
Advisor Shares Pure US Cannabis ETF (MSOS)
With an expense ratio of 0.60%, the Advisor Shares Pure US Cannabis ETF (NYSEARCA:MSOS) is the first actively managed U.S.-listed ETF with dedicated cannabis stocks to buy focusing exclusively on U.S. companies, including multi-state operators, as noted on the ETF’s site.
Some of its top holdings include Green Thumb Industries (OTCMKTS:GTBIF), Curaleaf, Trulieve Cannabis and Cresco Labs (OTCMKTS:CRLBF).
As I usually note, ETFs are a great investment. Not only do they allow you to diversify with dozens of stocks, but they’re also cheaper. You can buy MSOS ETF, for example, for less than $8, while gaining exposure to its 25 holdings.
Technically, after pulling back from about $10.50 to $7.87, the MSOS ETF appears to have caught strong support dating back to March. From its last traded price, I’d like to see it initially retest $10.50 as we near rescheduling, potential legalization in Florida and further potentially positive mentions ahead of the presidential election.
On the date of publication, Ian Cooper did not hold (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
