Many investors and analysts have been bullish on the prospects of the U.S. cannabis industry since its legalization in several states. However, despite being legal in 40 out of 50 U.S. states for medical use and 24 out of 50 for recreational, the drug is still not federally legal.
Many people have gotten excited about federal legalization prospects, as news of a potential rescheduling has broken out. More specifically, the Department of Justice has recommended that cannabis be rescheduled as a Schedule III controlled substance. This would put it into the same category as prescription drugs such as ketamine and codeine.
In turn, this has spurred the conversation about which cannabis stocks to watch.
However, it’s key to understand that only the Drug Enforcement Agency can reschedule cannabis, and that rescheduling would not make it federally legal. Rather, it would open more research avenues for the drug in a medical capacity, ultimately broadening prospects for cannabis businesses specialized in its therapeutic applications.
Curaleaf Holdings (CURLF)
With over 350,000 patients relying on Curaleaf Holdings (OTCMKTS:CURLF) for their medical cannabis, the company sits in a strong position to capitalize on relaxed federal regulations around its medical uses. Moreover, both in branding and marketing, Curaleaf portrays itself as more than a recreational drug provider. Instead, it uses terms such as “wellness” and “self-care” to promote its products.
In turn, this makes the company more appealing to adults who tend to be on the fence about cannabis, due to the social perceptions around its usage and users. Should cannabis federal regulations loosen, and the U.S. cultural perception around cannabis shift, Curaleaf’s branding could take it far, since it appears more as a mental health aid than an escape.
The company has seen healthy growth in its stock price, with 42% growth over the last 5 years and strategic expansion into Canada due to legal cannabis markets there.
Green Thumb Industries (GTBIF)
We previously discussed Green Thumb Industries (OTCMKTS:GTBIF), due to its status as one of the largest multi-state cannabis operators in the U.S. Now, with renewed talks of cannabis legislation changes, the company’s extensive production and distribution network make it a strong play. Thanks to over 80 retail locations across the U.S., the company has been able to continuously improve public perception.
With yet another profitable quarter under its belt, GTBIF has maintained a profit since 2020. As such, investors can expect Green Thumb to broaden its addressable market, should rescheduling occur. Furthermore, with its current market capitalization, the stock has a strong jumping-off point, should it be listed on major U.S. exchanges.
Better yet, since my last recommendation, the company’s Q1 2024 earnings report has supported the company’s steady positive trajectory. With its stable business model, and exceptional earning-per-share growth of 67.36% year-over-year, GBIF still deserves a spot on investors’ list of cannabis stocks to watch.
Trulieve Cannabis (TCNNF)
Trulieve Cannabis (OTCMKTS:TCNNF) markets itself as a vertically integrated cannabis company and multi-state operator in the U.S. Through its American market hubs in the Northeast, Southeast and Southwest, the company has focused on wide geographical distribution, as the legality of cannabis pratically remains at the state level.
This has allowed the company to strategically grow its medical and recreational offerings, depending on the local regulations where its dispensaries are located.
Moreover, the company focuses exclusively on premium products across its brand portfolio as it attempts to reach users with deeper pockets. From vaporizers to topicals, the company’s brands are well-diversified to apply its cannabis production efficiently across various use categories.
Due to this approach, the company achieved a revenue of $298 million in Q1 2024, representing a 4% increase year-over-year, with 96% of revenue derived from retail sales.
This demonstrates steady growth for the company and an overall willingness from its customers to buy its premium products, despite a trend of tightening consumer spending in recent months.
On the date of publication, Viktor Zarev 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.
