Cannabis stocks initially sounded like a compelling opportunity when Canada became the first G7 nation to legalize recreational marijuana. At the time, the popular belief was that the U.S. would eventually follow suit. After all, the war on drugs has largely been a failure. Concerns also sprouted to the forefront about the social injustices tied to drug law enforcement.
Unfortunately, cannabis stocks skyrocketed then cratered. What happened? The bottom line was that the sector suffered from a classic case of buy the rumor, sell the news. Stated differently, the anticipation of a legal nirvana for botanicals dramatically lifted sentiment. Once the administrative and business realities hit the streets, the excitement wore off.
However, the “green” sector may be due for a comeback. Politically, there’s a push for finalizing the rescheduling of marijuana to a lower level of enforcement. With the right catalysts – and a few things moving in the right direction – marijuana could be exciting again. Below are three cannabis stocks to consider.
Innovative Industrial Properties (IIPR)
Structured as a real estate investment trust or REIT, Innovative Industrial Properties (NYSE:IIPR) represents one of the more sensible cannabis stocks to consider. Historically, the sector received a reputation for being extremely volatile. Judging from its collapse in 2022, Innovative isn’t exempt from this wildness. Relatively speaking, though, IIPR stock is strong, gaining over 51% in the past 52 weeks.
One advantage that the REIT has over other enterprises is that it’s not a pure-play example among cannabis stocks. Rather, the company provides specialized properties and other services to experienced, state-licensed operators. Stated differently, the company provides the tickets to the big game; it’s not involved in placing a wager on a specific team.
That makes the business more predictable than other marijuana-related enterprises. However, that predictability comes at a cost. Right now, shares trade hands at 10.79X trailing-year sales. This is quite elevated. Also, in the past year, the metric sat at 8.33X.
However, the company makes up for this valuation premium with a forward dividend yield of 6.46%. This makes IIPR an attractive idea to speculate on.
Jazz Pharmaceuticals (JAZZ)
As you might guess, Jazz Pharmaceuticals (NASDAQ:JAZZ) is also not a pure-play example of cannabis stocks. Instead, it’s a global biopharmaceutical firm with a focus on oncology and neuroscience. So, why bother mentioning JAZZ stock? The company made history with its therapeutic called Epidiolex, which is used to treat seizures associated with Lennox-Gastaut and Dravet syndromes. This drug utilizes cannabidiol or CBD.
For speculators, the argument could be that JAZZ stock may be due for a comeback. Since the beginning of the year, shares lost almost 11% of equity value. In the past 52 weeks, they’re down 13%. At the moment, JAZZ trades hands at 2.03X trailing-year revenue. That’s a modest discount to the past year’s average metric of 2.19X.
However, what makes the biotech firm intriguing is the analysts’ projections. They’re calling for sales to hit $4.04 billion by the end of fiscal 2024. That’s up 5.5% from last year’s tally of $3.83 billion. In fiscal 2025, revenue may pop up again to $4.32 billion, up 6.9%. Therefore, it’s well worth keeping on your list of cannabis stocks to watch.
OrganiGram (OGI)
Finally, with OrganiGram (NASDAQ:OGI), we come to one of the pure-play candidates for cannabis stocks to buy. According to its corporate profile, OrganiGram engages in the production and sale of cannabis and cannabis-derived products in its home market of Canada. It offers both medical cannabis solutions as well as adult-use recreational products.
Like other ideas in this space, OrganiGram is a mixed bag. Since the beginning of this year, shares gained nearly 14% of equity value. However, in the past 52 weeks, the performance is less impressive at 6.4% up. And over the past five years, the equity suffered a horrendous loss of almost 94%. Still, for the speculative type, OGI could be interesting.
At the moment, OGI stock trades at 1.03X sales. In the past year, this metric stood at 1.34X. Further, in the quarter ended February 2023, the price-to-sales multiple stood at 2.06X. Looking out to the end of this year, sales could hit $113.07 million. By fiscal 2025, revenue could jump again to $128.01 million. It’s super risky but it’s worth keeping tabs on.
On the date of publication, Josh Enomoto did not have (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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
