Following an initial surge in cannabis stocks, the botanical sector, if you will, struggled for traction. While Canada made headway in legalizing the much-maligned plant, in the U.S., lawmakers have staunchly resisted calls for greenlighting marijuana at the federal level. However, the Biden administration’s recent proposal to classify cannabis as a lower enforcement category could lift sentiment.
To be clear, reclassification does not equate to federal legalization. That issue still remains thorny, especially among certain political circles. However, it’s possible that in a tight presidential race, Republican candidate Donald Trump and his fellow conservatives may need to relax their draconian stance. Certainly, they wouldn’t want a plant to disrupt their momentum.
Plus, even with President Joe Biden performing rather poorly, the ideological divide is a robust one. It’s unlikely that a bad debate performance is going to suddenly change voting behaviors or intentions. So, a second Biden term wouldn’t be impossible. And that would be great for the below cannabis stocks.
Scotts Miracle-Gro (SMG)
To be sure, Scotts Miracle-Gro (NYSE:SMG) isn’t exactly what you would call a pure-play example of cannabis stocks. I’d go so far as to say that Scotts would prefer consumers not mention that term. Technically speaking, the company falls under the agricultural inputs industry. With its subsidiaries, Scotts manufactures, markets and sells products for law, garden care and indoor and hydroponic gardening solutions.
But who are we kidding? Invariably, with the rise of a particular blend of botanical pursuits, Scotts will likely enjoy downwind benefits. It’s not just a statement of narratives but rather, one can see the results on the financials. Okay, the company suffered a bad miss in the second quarter of last year. However, in the trailing year since Q1, its average earnings per share reached 16 cents. That’s above the collective consensus view of 11 cents.
Analysts believe that for fiscal 2024, EPS may rise over 113% to $2.58. On the top line, sales may reach $3.56 billion, which is a modest increase from last year. However, fiscal 2025 revenue could rise to $3.64 billion, up 2.3%.
It’s not exciting but it’s one of the dependable cannabis stocks.
Canopy Growth (CGC)
Getting into the heart of cannabis stocks, Canopy Growth (NASDAQ:CGC) is one of the sector’s most popular ideas. Per its public profile, Canopy along with its subsidiaries engages in the production, distribution and sale of cannabis and hemp-based products. It serves both the recreational and medical purpose markets. While exciting, CGC stock has been all over the map this year.
Because the Biden administration’s reclassification proposal dramatically shifted sentiment, it’s difficult to extract meaningful insights from its financials. Since its inception, Canopy has long struggled to generate profits. In the trailing 12 months (TTM), the company posted a net loss of $483.68 million. However, sales hit $297.15 million and this has been a steadily improving metric.
Therefore, I’m not sure that sales will drop 10.4% to $225.24 million by year’s end like experts are predicting. Rather, the high-side estimate of $258.37 million would seem more plausible. Either way, in the following year, the most optimistic target calls for $297.68 million. That just might happen with the right political catalysts. CGC is a name to watch closely.
Tilray (TLRY)
Another pure-play example of cannabis stocks, Tilray (NASDAQ:TLRY) is promising but risky. Like Canopy Growth above, TLRY stock has been all over the map this year. However, the price action is even wilder, leading to some anxious moments for stakeholders. For those interested in the cannabis lifestyle and consumer packaged goods specialist, you must be prepared for turmoil.
Like it or not, the narrative for Tilray comes down mostly to speculation. In terms of financials, it’s difficult to dissect. In the past four quarters, the company incurred a loss per share of 11 cents. That’s worse than the anticipated red ink of 5 cents. However, it’s noteworthy that in the TTM period, Tilray rang up sales of $743.25 million, representing a sharply rising trajectory.
Enticingly, analysts believe that by the end of fiscal 2024, revenue could hit $783.18 million. That’s up almost 25% from last year’s print of $627.12 million. Also, in the following year, sales may swing u to $863.72 million, with the most optimistic expert calling for $924.4 million.
If you have the stomach for it, TLRY could be one of the cannabis stocks to bet 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.
