To say it’s been a rough two years for the cannabis industry is an understatement. Due to a combination of issues (including some self-inflicted wounds), the cannabis boom predicted in 2018 has not materialized. But that could be about to change.
If Joe Biden wins the presidential election, it will likely be part of a “Blue Wave” that will bring Democratic party control of both houses of Congress. And even if President Trump successfully wins a second term, it is still possible that Republicans could lose their hold on the Senate.
The bottom line is there is a range of outcomes that are possible. Most of those outcomes are favorable to the legalization of marijuana. And even if cannabis is not made legal on the federal level, it seems likely that the remaining states holding out will take steps to legalization. That’s because, like gambling, cannabis may create an economic lift that cash-strapped states may find too difficult to turn down.
One thing is certain. If you wait until the right time, you’ll have missed out on some eye-popping initial gains. But to get that reward in the future, you’ll need to assume some risk now. In this special presentation, we’ve identified seven cannabis stocks that you can consider when evaluating your opportunity in the cannabis sector.
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- Canopy Growth
- Organigram
- Curaleaf
- Cresco Labs
- Innovative Industrial Properties
- Scotts Miracle-Gro
- Trulieve Cannabis
#1 - Canopy Growth (NASDAQ:CGC)
Canopy Growth (NYSE:CGC) is perhaps the most familiar name in the cannabis space. But that doesn’t mean it’s all been smooth sailing. Like all cannabis stocks, the company is eagerly waiting for legalization in the U.S. market. However, Canopy Growth has considerable backing from Constellation Brands (NYSE:STZ) that owns 38% of Canopy.
Canopy is the largest marijuana company in Canada and has 30% of its medical marijuana market. As the recreational market begins to open up, it’s logical to presume that Canopy will capture its fair share of that market as well. Constellation says it has plans for Canopy to generate $1 billion in revenue. Constellation is getting some traction as it launches its cannabis-infused beverages in Canada under the Tweed brand name. Part of Constellation’s optimism is that it is planning to roll out these beverages in the United States. And you would figure that Canopy will get a lift from that.
About Canopy Growth
Canopy Growth Corporation, together with its subsidiaries, engages in the production, distribution, and sale of cannabis and hemp-based products for recreational and medical purposes primarily in the United States, Canada, Germany, and internationally. It operates through Canada Cannabis, International Markets Cannabis, and Storz & Bickel segments.
Read More - Current Price
- $3.76
- Consensus Rating
- Reduce
- Ratings Breakdown
- 0 Buy Ratings, 2 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $3.50 (6.9% Downside)
#2 - Organigram (NASDAQ:OGI)
Organigram (NASDAQ:OGI) is one of the weaker performers among cannabis stocks this year. OGI stock is down nearly 50% this year. And the bigger problem is that this is not a new occurrence. The stock has been a laggard for the better part of four years. Some of this has to do with legal marijuana’s inability to compete with the Canadian black market.
In 2020, much of that has to do with its inability to capitalize on the Cannabis 2.0 movement in its home country of Canada. So what makes the company an appealing option? The short answer is volume.
Organigram is one of the largest cannabis producers in Canada. And that gives it a chance. But first, the company has had to go through a significant restructuring. That seems nearly complete. To be sure, the company will have a lot of ground to make up. Organigram is a contrarian play, but not an altogether foolish one.
About Organigram
Organigram Holdings Inc, through its subsidiaries, engages in the production and sale of cannabis and cannabis-derived products in Canada. It offers medical cannabis products, including whole flower, milled flower, pre-rolls, infused pre-rolls, vapes, gummies, and concentrates for medical retailers; adult use recreational cannabis under the SHRED, Holy Mountain, Big Bag O' Buds, Monjour, Trailblazer, SHRED'ems, Edison Cannabis Co, Edison JOLTS, Tremblant, and Laurentian brands.
Read More - Current Price
- $1.48
- Consensus Rating
- Buy
- Ratings Breakdown
- 2 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#3 - Curaleaf (OTCMKTS:CURLF)
Curaleaf (OTCMKTS:CURLF) has operations in 23 of the United States. The Massachusetts-based company is the largest medical marijuana distributor in New Jersey. In this case, timing is everything. The state has a ballot initiative that, if passed, will legalize adult-use recreational marijuana. And if recent polling is accurate, that initiative looks likely to pass.
This would put Curaleaf in a position to capitalize on that vote. But more importantly, if New Jersey legalizes adult-use recreational marijuana, it is likely that other Northeast states will follow.
Curaleaf currently brings in over 20% of the total medical marijuana revenues in New Jersey. But the company is growing smartly. Curaleaf posted $117 million in revenue last quarter, which marked 22% sequential growth and a 142% year-over-year increase.
Furthermore, Curaleaf is slowing its cash burn. The two million the company lost in the prior quarter was 12x less on a year-over-year basis. This puts Curaleaf in a position where it could be profitable in 2021, a significant accomplishment for cannabis companies.
About Curaleaf
Curaleaf Holdings, Inc operates a cannabis operator in the United States. It operates through two segments, Domestic Operations and International Operations. The company offers flower, pre-rolls, flower pots, and dry-herb vaporizer cartridges; concentrates for vaporizing which includes pre-filled vaporizer cartridges and disposable vaporizer pens; and concentrates for dabbing, such as mints, distillate droppers, mints, topical balms and lotions, tinctures, lozenges, capsules, and edibles.
Read More - Current Price
- $2.10
- Consensus Rating
- Buy
- Ratings Breakdown
- 2 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $6.25 (198.3% Upside)
#4 - Cresco Labs (OTCMKTS:CRLBF)
Another cannabis company taking a slow but steady approach to profitability is Cresco Labs (OTCMKTS: CRLBF). The company is one of the largest multi-state cannabis operators in the United States. Cresco has operations in 19 retail locations in nine states, including California, home to the United States' largest legal marijuana market.
Last quarter, Cresco reported a 42% increase in revenue from the prior quarter. And the growth was evenly distributed in every state that Cresco operates in. In fact, the company saw growth of at least 30% in every state but one. And that state, Massachusetts, temporarily halted sales of recreational marijuana.
And now Cresco is looking to expand its operations. It is expecting to open 10 more retail locations. Plus, it plans to increase market penetration in California. And because the company does not have a presence in 24 states where cannabis is legal, it has even more room for growth.
About Cresco Labs
Cresco Labs Inc, together with its subsidiaries, cultivates, manufactures, and sells retail and medical cannabis products in the United States. It provides cannabis in flowers, vape pens, live resins, disposable pens, and extracts under the Cresco brand; vape carts, vape pens, flower, popcorn, shake, pre-rolls, shorties, and concentrates under the High Supply brand; vapes and gummies under the Good News brand; vapes and edibles under the Wonder Wellness Co brand; and tinctures, capsules, salves, and sublingual oils under the Remedi brand.
Read More - Current Price
- $1.20
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 4 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $2.50 (109.2% Upside)
#5 - Innovative Industrial Properties (NYSE:IIPR)
Innovative Industrial Properties (NYSE:IIPR) is the leading real estate investment trust (REIT) for cannabis companies. As the market opens up for medical and recreational marijuana, companies need room to grow the product. Innovative Industrial Properties provides climate-controlled greenhouses that allow cannabis to grow under optimal conditions.
Here’s how it works. Innovative Industrial Properties buys properties from medical cannabis companies. They then lease the property back to the operators. This gives IIP a steady revenue stream.
If you want more good news, the company already has an infrastructure in place for medical marijuana demand. That means they’re already ahead of the game as the recreational market begins to grow. As a bonus, that infrastructure is in place throughout 16 states, which gives it an advantage over some of its smaller competitors. The company was only in 14 states in 2019, so investors get a sense of this stock's growth potential.
And unlike the cannabis companies, Innovative Industrial Properties is already profitable.
About Innovative Industrial Properties
Innovative Industrial Properties, Inc is a self-advised Maryland corporation focused on the acquisition, ownership and management of specialized properties leased to experienced, state-licensed operators for their regulated cannabis facilities. Innovative Industrial Properties, Inc has elected to be taxed as a real estate investment trust, commencing with the year ended December 31, 2017.
- Current Price
- $105.27
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 3 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $127.67 (21.3% Upside)
#6 - Scotts Miracle-Gro (NYSE:SMG)
Scotts Miracle-Gro (NYSE:SMG) is a different way to play the cannabis sector. The company doesn’t grow or distribute cannabis. Rather, they provide established cannabis companies with the means to do what they do. Scotts does this through Hawthorne Gardening. This is a separate business unit that sells hydroponics, lighting, and related equipment.
Last quarter, this unit reported 72% sales growth with $302.9 million in revenue.
It stands to reason that as more states begin to legalize medical and recreational marijuana, Scotts stands to be a benefactor. But the reason investors should be interested in SMG stock is that it isn’t just helping cannabis companies. It has an entire business unit that delivers over $1 billion in quarterly sales.
SMG stock is up 48% for the year. And investors can also get a dividend with the stock, and a secure one at that. In the last quarter, the company issued a special dividend of $5 per share, and it raised its dividend payments by 7%.
About Scotts Miracle-Gro
The Scotts Miracle-Gro Company, together with its subsidiaries, manufactures, markets, and sells products for lawn, garden care, and indoor and hydroponic gardening in the United States and internationally. It operates through three segments: U.S. Consumer, Hawthorne, and Other. The company provides lawn care products, comprising lawn fertilizers, grass seed products, spreaders, and other durable products, as well as lawn-related weed, pest, and disease control products; and gardening and landscape products, which include water-soluble and continuous-release plant foods, potting mixes, garden soils, mulches and ground cover products, plant-related pest and disease control products, organic garden products, and live goods and seeding solutions.
Read More - Current Price
- $75.18
- Consensus Rating
- Hold
- Ratings Breakdown
- 2 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $78.60 (4.5% Upside)
#7 - Trulieve Cannabis (OTCMKTS:TCNNF)
If you believe in the idea that slow and steady wins the race, then you’ll love the approach that Trulieve Cannabis (OTCMKTS:TCNNF) has taken to the cannabis market. The company has focused on one market, Florida. In fact, 59 out of the company’s 61 dispensaries are in the Sunshine State.
This disciplined approach is reflected in the company’s financials. Trulieve has posted positive net income for eight straight quarters. In the quarter ending June 30, the company posted a record $120.8 million in sales. This marked year-over-year sales growth of 109%.
In addition to its dispensaries in Connecticut and California, Trulieve has announced plans to expand into Massachusetts in 2021. The company has also made two strategic acquisitions in Pennsylvania to support its growth in the Northeast.
TCNNF stock is up 105% for the year as of this writing. Trulieve has its financials in order and looks to be a strong cannabis play even if legalization doesn’t move as swiftly as some hope.
About Trulieve Cannabis
Trulieve Cannabis Corp., together with its subsidiaries, operates as a cannabis retailer. The company cultivates, processes, and manufactures cannabis products and distributes its products to its dispensaries, as well as through home delivery. It sells flowers, edibles, vapes, creams, balms, salves, lotions, vaporizers, batteries, cartridge, concentrates, topicals, capsules, synringes, tinctures, and accessories under the Avenue, Cultivar Collection, Muse, Modern Flower, Alchemy, Momenta, Sweet Talk, Co2lors, Loveli, Trekkers, and Roll One brands.
Read More - Current Price
- $6.31
- Consensus Rating
- Buy
- Ratings Breakdown
- 2 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $16.75 (165.5% Upside)
Is now the time to invest in cannabis stocks? I think it’s a time for cautious optimism. The political climate is changing. Even in traditionally conservative states, the efficacy of medical marijuana is overtaking moral/ethical concerns. And the economic reality of recreational marijuana will be very compelling for states that have yet to legalize cannabis.
There may be a range of outcomes to the presidential election. And, likely, we won’t know the winner on election night. Investing in cannabis is not a short-term proposition. However, it now looks like the issues preventing legalization are now falling into place for those willing to wait.
And despite the headlines that have kept cannabis stocks in the news the last few years, this is still an embryonic market segment. There is a lot of opportunities, but also a great deal of risk. If you’re willing to assume some risk, these seven cannabis stocks are a good way to start adding to, or starting, a position in cannabis stocks.
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