Despite the ongoing challenges, the cannabis industry has been responsive to innovation, growth, and transformation. The article lists three key players poised to capitalize on unique aspects of the cannabis market.
Unlike its peers, the first stock has roots in medical cannabis, granting it a formidable foothold in global markets. From Canada to Europe and Australia, it’s not just about medical cannabis but the company’s focus on innovation and diversification that lead to long-term stability.
Real estate and cannabis might seem like an unlikely pairing, yet the second one has efficiently combined the two. By leasing high-quality properties to established cannabis operators, the company secures a steady stream of rental income, creating stable growth in a fluctuating market.
Through strategic investments and partnerships, the third one is crafting a unique identity by incorporating cutting-edge technology and genetics into its offerings. The introduction of THCV-rich formulations and seed-based production showcases the company’s focus on anticipating and catering to consumer trends. It is setting the stage for sustainable success.
The article delves deep into each company’s strategy, potential, and what sets them apart in the dynamic cannabis market.
Cannabis Stocks: Aurora Cannabis (ACB)
Aurora Cannabis (NASDAQ:ACB) emphasizes medical cannabis, which sets it apart from others in the industry. Its leadership in global medical cannabis markets, including Canada, Europe, and Australia, gives it a competitive advantage.
The company produces high-potency cultivars with strong gross margins and market share positions. It enables Aurora to capture a loyal patient base and capitalize on the growing demand for medical cannabis products worldwide.
Also, Aurora’s commitment to innovation and product development is expected to drive growth. Introducing approximately 75 new products to the Canadian market and expanding its international channels with the best-performing cultivars and extracts could increase revenue streams and a broader customer base.
Further, the company’s move to diversify beyond cannabis by investing in plant propagation, specifically through its controlling interest in Bevo, can provide a stable revenue stream. The controlled-environment agricultural industry, which includes plant propagation, is set to play a crucial role in the future. The company is addressing issues such as food supply security and reducing carbon footprints. Thus, the diversification positions Aurora to tap into a growing market.
Moreover, Aurora’s efforts to reduce costs and optimize operations demonstrate a fiscal responsibility commitment. The company has a track record of decreasing convertible debt significantly. Its focus on generating positive free cash flow by 2024 indicates prudent financial management.
In terms of global expansion, Aurora’s presence in key international markets, such as Germany, Poland, the UK, and Australia, positions it to take advantage of potential regulatory changes and market growth. Regulatory shifts, particularly in Germany’s medical cannabis market, could lead to significant expansion opportunities. Finally, Aurora’s expertise and cultivation capabilities may enable it to excel in new markets as they open up. Thus, it makes the list as one of my top cannabis stocks.
Innovative Industrial Properties (IIPR)
Innovative Industrial Properties (NYSE:IIPR) has a high-quality portfolio and a balanced financial structure. Its portfolio consists of mission-critical properties. These properties are leased to reputable cannabis operators, ensuring consistent rental income. Their high-quality portfolio of properties across 19 states gives them a competitive advantage.
Additionally, the company maintains a balanced financial structure with a debt-to-total gross assets ratio of 12%. The conservative approach reduces financial risk and provides flexibility for the company. It led the company to pursue growth opportunities, withstand market fluctuations, and continue providing stable returns to investors.
Additionally, the company can consistently generate revenue through its properties, and its focus on selective acquisitions and investment opportunities allows it to make strategic decisions contributing to sustained growth.
Moreover, the company’s portfolio is well-diversified across multiple states and tenants. It reduces the risk associated with relying on a single market or operator. With no tenant representing more than 14% of total invested capital, the company is less exposed to the challenges faced by individual operators.
Favorably, Innovative Industrial Properties has a track record of returning value to its investors through dividends. The company declared $7.20 in dividends per share over the past 12 months. It represents an 11% increase over the prior year. This commitment to providing dividends can attract income-oriented investors.
Despite challenges, the regulated cannabis industry’s long-term growth potential remains strong. Industry research forecasts substantial growth, with annual sales projected to double from 2023 to 2030, reaching over $70 billion.
Fundamentally, positive developments in legislation, such as the SAFE Banking Act, and state-level momentum for cannabis programs and tax relief can further enhance the industry’s stability and growth potential. These changes could lead to improved financial conditions and access to capital for the cannabis industry. I believe that makes it one of the best cannabis stocks to buy right now.
OrganiGram (OGI)
On the caboose of this list of cannabis stocks, OrganiGram (NASDAQ:OGI) has exhibited growth in its Canadian recreational business, driven by innovative products and excellence in retail execution. It has maintained or improved its market share in categories like gummies (50.2%), hash (22%), and milled flowers (53%).
Further, the company’s focus on innovation, as seen in partnerships and investments, is pivotal. Strategic investments in companies like Green Tank Technologies and Phylos Bioscience ensure access to cutting-edge vaporization technology and unique seed genetics. These innovations can help OrganiGram differentiate its products, enhance consumer experiences, and expand its consumer base.
OrganiGram’s investment in THCV-rich cultivars through Phylos Bioscience opens doors for developing products catering to consumer needs, such as improved focus, creativity, and calmness. As THCV gains popularity for its non-psychoactive properties, OrganiGram’s focus on incorporating it into various formulations (starting with gummies and vapes) positions the company at the forefront of catering to emerging consumer trends.
Also, the company invests in operational improvements and cost-cutting projects. It includes automation, optimized drying processes, and seed-based production. They are expected to yield substantial savings. This increased operational efficiency enhances the company’s profitability and ability to maintain competitive pricing.
Similarly, OrganiGram invests in seed-based production. Interestingly, it is strategically timed. This transition will be gradual and iterative, starting in four grow rooms. Seed-based production offers advantages such as reduced growth time (65 to 80 days compared to 100 days), standardized flowers, and minimized disease risks. This approach aligns with consumer demand for novelty while cutting labor costs and turning to grow rooms more swiftly.
Fundamentally, collaborative efforts with BAT in research and development promise to yield innovative products and delivery methods, enhancing the consumer experience. Lastly, developing emulsions, vapor formulations, and packaging solutions allows OrganiGram to provide novel products and continuously maintain a competitive edge. Thus, it is one of the best cannabis stocks in my book.
As of this writing, Yiannis Zourmpanos was long IIPR. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
