The cannabis sector has been relatively quiet lately. With federal legalization in the U.S. likely still years away, many investors have turned their attention elsewhere, leaving cannabis stocks to collect dust. However, just because the hype around cannabis stocks has faded, doesn’t mean there aren’t still some strong buying opportunities in this space.
In fact, I believe now is the perfect time to start building a position in high-quality cannabis stocks before the inevitable catalyst of federal legalization sends them soaring again. While many companies in this industry are still burning cash and struggling to build sustainable businesses, a select few companies have reached or are nearing profitability even in the current restrictive environment. Here are three such cannabis stocks to pay attention to right now.
High Tide (HITI)
I’ve had my eye on High Tide (NASDAQ:HITI) for several months now as one of my top cannabis pure-play stocks. While the stock may still demonstrate some volatility in the near-term, I believe bearish sentiment has bottomed out, and the stock is likely on the cusp of a turnaround as High Tide approaches profitability.
High Tide continues to perform exceptionally well in the Canadian cannabis market. And even without full recreational legalization in the U.S., this company can still thrive up north.
Wall Street analysts forecast High Tide reaching profitability by fiscal 2025, with rapid earrings growth seen in the years to come. Consensus earnings per share projections call for growth from 9 cents in 2025 to 64 cents in 2030. That implies a forward price-earnings ratio of just 3-times based on 2030 earnings for a company growing at a double-digit clip. Even if High Tide only meets half those profit projections, shares could easily double. Federal legalization will likely hit before 2030 as well, acting as an added catalyst for multiple expansion.
Beyond profitability, Hight Tide’s revenue growth remains stellar. Revenue is expected to more than double from 2024 to 2028. Yet, shares trade at a mere 0.37-times 2024 sales estimates, which is incredibly inexpensive relative to the company’s growth prospects. This stock has all the ingredients for an epic turnaround rally over the coming years.
Green Thumb Industries (GTBIF)
Unlike many money-losing cannabis players, Green Thumb Industries (OTCMKTS:GTBIF) already delivers consistent profits. The company may lack some of the flashy growth of unprofitable cannabis stocks today. But more subdued expansion now positions this cannabis leader for stronger acceleration when conditions improve.
Green Thumb’s earnings per share are forecast to multiply nearly 15x over the next nine years. Meanwhile, sales are projected to surge from approximately $1 billion today to $3.4 billion by 2030. This steady upward trajectory is far more sustainable than many hype-driven cannabis names. When U.S. legalization hits, Green Thumb can shift focus beyond medicinal cannabis into the more lucrative recreational segment. Its established U.S. footprint offers this player a huge advantage.
For investors seeking cannabis exposure without excessive risk, Green Thumb Industries checks all the boxes, in my opinion. The company generates cash flow, not losses, like most of its peers. Once the regulatory climate shifts in Green Thumb’s favor, this stock offers explosive upside from today’s reasonable valuation.
Innovative Industrial Properties (IIPR)
Innovative Industrial Properties (NYSE:IIPR) is a cannabis-adjacent stock with direct ties to the sector. After the initial weed cannabis hype bubble popped, IIPR stock cratered more than 70% from its peak. But rumors of this REIT’s demise have been greatly exaggerated.
Despite industry struggles, IIPR continues to collect more than 97% of rents due each quarter. The last thing struggling cannabis companies want is to lose access to growing facilities. Thus, the company’s business model remains solid. And with real estate broadly outperforming expectations lately, IIPR is ready for its own rally.
Trading at just 12-times funds from operations (FFO) with a dividend yield approaching 8%, IIPR offers value, income, and cannabis exposure in one stable package. As irrational fears plaguing property owners and pot stocks dissipate, this unique REIT can deliver outsized returns.
On the date of publication, Omor Ibne Ehsan did not hold (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.
