The cannabis market is set for significant growth, driven by increasing legalization and consumer demand. Several pot stocks are poised for high returns, reflecting broader market trends.
Several things are pushing the needle for these pot stocks to reach new highs. The global cannabis market is projected to grow at a compound annual growth rate (CAGR) of over 20% in the next few years. This growth is fueled by rising medical and recreational use.
As more regions legalize cannabis, regulatory frameworks are becoming more supportive, facilitating market entry and expansion for pot stocks. At the same time, increasing acceptance and use of cannabis for medical and recreational purposes are driving demand. Products such as edibles, oils, and topicals are gaining popularity, contributing to market diversification.
Pot stocks could then become some names for investors to seriously consider adding to their portfolios. Here are seven of the best that I think they should consider.
Green Thumb Industries (GTBIF)
Green Thumb Industries (OTCMKTS:GTBIF) is noted for its consistent profitability. The company also appears well-positioned for strong performance and potential high returns. GTI delivered impressive revenue growth of 11% year-over-year, reaching $276 million in the quarter. The company also achieved significant improvements in profitability, with a 240% increase in GAAP net income to $31 million and a 19% increase in Adjusted EBITDA to $91 million compared to the prior year period.
GTI’s strong cash flow generation, with cash flow from operations increasing 12% to $84 million, and its healthy cash balance of $224 million at quarter-end, provides the company with financial flexibility to invest in growth initiatives.
Also, GTI’s solid financial performance is supported by its strategic focus on expanding its retail presence, with 15 new RISE Dispensaries added since Q1 2023, and the introduction of adult-use sales in Maryland. The company’s Consumer Packaged Goods segment also demonstrated robust growth, with gross revenue increasing 19.3% compared to the previous year. This makes it one of those pot stocks to consider.
Cresco Labs (CRLBF)
Cresco Labs (OTCMKTS:CRLBF) is a major player in the U.S. cannabis market, focusing on core markets, core stores, and core products.
CRLBF is demonstrating improved financial performance and cash flow generation, positioning it well for future growth and potential high returns. Despite a 5% year-over-year decline in revenue last quarter, which was primarily due to strategic divestitures aimed at driving profitability, Cresco Labs achieved significant improvements in its bottom line.
The company reported a 7% increase in adjusted gross profit to $95 million and an impressive 1,380 basis point expansion in its adjusted EBITDA margin, reaching 29%. This resulted in an 82% year-over-year growth in adjusted EBITDA to $53 million. Cresco Labs also generated strong cash flow, with operating cash flow increasing 10-fold to $36 million and free cash flow reaching $33 million.
With upcoming catalysts such as potential adult-use legalization in Ohio, Florida, and Pennsylvania, Cresco Labs stands well-positioned to capitalize on these opportunities and improve profitability further.
Trulieve Cannabis (TCNNF)
Trulieve Cannabis (OTCMKTS:TCNNF) has a reputation for its dominant presence in Florida, with plans to expand into other states.
Last quarter, TCNNF delivered impressive financial results, with revenue of $298 million, exceeding expectations and marking a 4% increase both sequentially and year-over-year. The company’s focus on operational efficiency and cost management led to significant improvements in profitability, with net loss narrowing to $23 million, a 64% improvement from the prior year. Trulieve also demonstrated strong cash flow generation, with a free cash flow of $124 million.
During the quarter, the company opened three new dispensaries, bringing its total retail presence to 196 locations, with 31% of stores now located outside its home state of Florida. I think that the continued expansion of TCNNF’s footprint will only bode well for investors moving forward, which makes it one of those pot stocks for investors to buy.
Innovative Industrial Properties (IIPR)
Innovative Industrial Properties (NYSE:IIPR) focuses on the acquisition and management of specialized industrial properties leased to state-licensed operators for their regulated cannabis facilities.
Last quarter, IPR reported revenue of $75.5 million, a slight decrease of 1% compared to the same period last year, falling short of analyst estimates. The company’s net income and earnings-per-share (EPS) also missed expectations, with EPS of $1.36 coming in below the estimated $1.43.
IIPR reported a net income of $39.1 million, which fell short of the estimated $40.69 million and decreased from the $40.75 million recorded in the same quarter last year. One of the key factors contributing to the lower profitability is the decrease in revenue.
However, its net income remains strong, and as the cannabis market continues to develop, this could bode very well for investors with positions in pot stocks.
Cronos Group (CRON)
Cronos Group (NASDAQ:CRON) is a globally diversified and vertically integrated cannabis company with a focus on international markets.
In the last 12 months, Cronos Group reported a net loss of $57.04 million, with a loss per share of 14 cents. This indicates that the company is not generating positive earnings and is instead operating at a loss. However, I think that this is only a temporary condition that CRON will one day be a very profitable business.
Analysts expect Cronos Group’s revenue to increase from $87.24 million in 2023 to $104.74 million in 2024, representing a 20.06% growth. Now revenue remains projected to reach $129.27 million in 2025, a 23.42% increase from 2024. This consistent revenue growth, if realized, could help Cronos Group improve its financial performance and move closer to profitability.
The earnings-per-share (EPS) forecast shows a gradual improvement over the next few years. While the company reported an EPS of negative 19 cents in 2023, analysts expect this to improve to negative five cents in 2024 and turn positive to one cent in 2025. Furthermore, one of the two analysts covering Cronos Group has issued a “Buy” rating, with a price target of $3.50, representing a 56.95% upside from the current stock price.
Tilray Brands (TLRY)
A well-known name in the cannabis industry, Tilray Brands, (NASDAQ:TLRY) continues to expand its market reach through mergers and acquisitions.
Tilray achieved a record Q1 net revenue of $177 million, representing a 15% year-over-year growth. The company increased its number one cannabis market share position in Canada to 13.4% and grew its Canadian cannabis revenue by 16.5% and international cannabis revenue by 37%.
The company reported a net loss of $56 million in Q1 2024, narrowing from a net loss of $66 million in the prior year quarter. However, Tilray achieved improvements in its adjusted EBITDA, which reached $11.4 million and generated a positive operating cash flow of $16 million, a significant improvement from the $46 million cash used in operations in Q1 2023.
Looking ahead, analyst forecasts suggest that Tilray has the potential for substantial revenue growth. The average revenue estimate for the fiscal year 2024 is $798.12 million, representing a 27.27% increase from the previous year. Analysts also project further revenue growth in the coming years, with estimates reaching $1.41 billion by 2029.
Village Farms International (VFF)
Village Farms International (NASDAQ:VFF) has diversified its operations into cannabis production.
Recently, the company achieved total sales growth of 21% year-over-year, reaching $78.1 million in Q1 2024. The company’s net loss per share improved significantly to negative three cents from negative six cents in the prior year quarter, while adjusted EBITDA increased six-fold to $3.6 million.
The company’s Canadian Cannabis segment, which includes Pure Sunfarms and Rose LifeScience, was a key driver of growth. Canadian Cannabis retail net sales grew 28% organically year-over-year, with the segment achieving positive adjusted EBITDA and free cash flow.
Village Farms’ Fresh Produce segment also delivered profitability on higher year-over-year sales and an improved EBITDA margin, contributing to the company’s overall strong performance.
All of these factors together point toward VFF as being one of those pot stocks for investors to add to their portfolios thanks to its strong recent performance and outlook.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.
