It’s safe to say that a lot of the shine has worn off the top cannabis stocks in the past few years. The optimism that preceded legalization hasn’t translated to strong businesses generally speaking. That said, growth is the continued expectation on an industry-wide basis.
In fact, annual growth rates are expected at above 34% through 2030. If early results have been less than spectacular it simply might not matter. There is plenty of growth ahead that promises to create champions. Further, if cannabis is legalized at the federal level that potential will only get stronger overall which is why cannabis remains worth considering.
Top Cannabis Stocks to Buy: Cresco Labs (CRLBF)
Cresco Labs (OTCMKTS:CRLBF) has been receiving attention in the cannabis stocks sector while trading below $2. It operates a vertically integrated business across 10 states meaning it has a lot of control over its operations. The company also operates 68 dispensaries giving it a decently sized footprint within which to grow.
However, Cresco Labs didn’t grow in the most recent period, instead contracting as sales fell from $214 million to $194 million in the first three months of 2023. That doesn’t worry me much. Again, the company has a relatively large revenue base following the slight downturn.
Investors should consider the positives regarding Cresco Labs because the company is improving. Its operational gains are falling but remain positive. The company continues to produce net losses overall. However, they aren’t as significant as those at other similarly sized cannabis operations. I think the firm’s vertical integration is allowing it to exercise additional control that limits its operational losses relative to its competition. In time, that should theoretically allow it to reach net gains quicker than its competitors. Reaching profitability is important in any growth industry and doubly so in a cannabis sector that has become synonymous with large losses.
Green Thumb Industries (GTBIF)
Green Thumb Industries (OTCMKTS:GTBIF) remains a beacon of hope for other cannabis firms and stocks searching for profitability. While it likely serves as a model for its peers it also serves as a worthwhile investment in the cannabis space.
Again. Green Thumb Industries is something of a unicorn in its sector. Not only does the firm produce sizeable gross profits (sales – the cost of goods sold) but it also produces consistent net gains.
The firm reported $9.4 million in net income during the first quarter. However, that figure reached $29.7 million a year earlier. Sales increased by roughly $6 million during the same period, reaching $248.54 million. Costs are clearly affecting the firm leading to declining gains. Yet, Green Thumb Industries remains a clear choice for investors given it can maintain profitability on a sustained basis.
GTBIF shares trade for $7 so there’s a lot of upside from the perspective that sales multiples in other industries remain much higher. If cannabis takes root as an industry that the markets truly care about, GTBIF is a surefire bet to run much higher.
Cronos Group (CRON)
Cronos Group (NASDAQ:CRON) is headed in the right direction. That makes the stock a buy at this point because it comes down to fundamentals when buying stocks. If a firm shows that it is improving investors should consider it. That simple idea describes Cronos Group.
The company is not yet profitable. However, that is a good place to begin in relation to understanding CRON stock. Revenues fell in the first quarter moving from $29.4 million to $27.2 million. Not exactly the best outcome, sure. However, net losses narrowed from nearly $33 million to under $20 million. Cronos Group has gotten the message that investors are no longer willing to fund increasing losses in the industry.
It continues to cut costs and is projecting positive cash flows by 2024. It also has over $800 million in liquidity reserves so it remains very well funded relative to losses. At under $2, CRON stock is worth a shot.
On the date of publication, Alex Sirois 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.
