I have talked about cannabis stocks to buy in several instances in the last few quarters. However, the timing for exposure couldn’t be better than now for several reasons.
A recent survey by Pew Research indicates that “an overwhelming share of U.S. adults (88%) say marijuana should be legal for medical or recreational use.”
The implication of this survey is significant because U.S. citizens will vote to choose the next President later this year. Presidential candidates will likely talk about the potential legalization of cannabis at the federal level.
Even before that, there is a high possibility that cannabis will be moved from its current classification as a Schedule I drug to a Schedule III drug. If this happens, it would imply loosening Federal Drug Enforcement Agency restrictions. The possible reclassification will likely pave the way for potential federal-level legalization after the Presidential elections.
From the perspective of cannabis stocks, the possibility of a decline in regulatory headwinds would be big news. I expect multibagger returns at the blink of an eye if regulatory outcomes are positive in the next 12 months. Let’s, therefore, talk about three cannabis stocks to buy.
Cronos Group (CRON)
Cronos Group (NASDAQ:CRON) stock has been trending higher, with returns of 40% in the last 12 months. The stock is poised for 10-bagger returns in the next few years. The basic assumption is that regulatory headwinds continue to wane in Europe and the United States.
The biggest positive for Cronos is a robust cash buffer of $855 million. The company has been waiting on the sidelines to make some big investments. On cannabis rescheduling or potential federal level legalization, Cronos can pursue aggressive growth.
It’s also important to note that Cronos has been making inroads into new geographies. The company has entered Germany, Australia and the United Kingdom in the last two quarters. This is likely to help accelerate revenue growth. At the same time, EBITDA margin is expected to improve on operating leverage. Therefore, CRON stock looks attractive with a big addressable market, robust cash buffer and steady expansion.
Curaleaf Holdings (CURLF)
Curaleaf Holdings (OTCMKTS:CURLF) stock is another one of the top cannabis stocks to buy before reclassification. CURLF stock has witnessed a healthy rally of 65% in the last 12 months, and I expect the positive momentum to be sustained.
The first point to note is that Curaleaf has a presence in 17 states in the U.S. With likely cannabis rescheduling and potential federal-level legalization, Curaleaf is well-positioned to benefit.
It’s also worth noting that Curaleaf has been delivering healthy growth in international markets. With a focus on expanding its presence in Europe, revenue growth will likely accelerate in the next few quarters.
Recently, Curaleaf completed the acquisition of Northern Green Canada. With the latter having EU-GMP certification, Curaleaf is positioned to make inroads into Germany, Poland and the United Kingdom. In emerging markets, Australia and New Zealand can potentially deliver value.
Overall, Curaleaf Holdings has a healthy EBITDA margin. However, growth has been subdued. With aggressive expansion in Europe, the growth outlook will likely be revised and translate into stock upside. Further, as regulatory headwinds wane in the United States, there is scope for market expansion.
Tilray Brands (TLRY)
Tilray Brands (NASDAQ:TLRY) stock has declined by almost 25% in the last 12 months. In my view, this is a good time to accumulate as TLRY stock seems undervalued.
In a recent development, Tilray has filed a prospectus supplement with the U.S. Securities and Exchange Commission. The objective is to raise $250 million through an at-the-market equity program. The company intends to use the proceeds for acquisition or expansion on possible U.S. Cannabis rescheduling.
It’s also worth noting that Tilray is the fifth largest craft beer player in the U.S. Therefore, the company already has a strong strategic infrastructure in the country. This will help in aggressive expansion once policy headwinds wane.
For Q3 2024, Tilray reported revenue growth of 30% on a year-on-year basis to $188 million. It’s worth noting that international cannabis revenue growth was 44%, and Tilray claims to have a leading market share in Germany. With the recent legalization of recreational cannabis in the country, I expect Tilray to benefit.
On the date of publication, Faisal Humayun 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.
