Some of the best cannabis stocks to buy could be in for a breakthrough in the second-quarter of 2024. Germany recently green-lit cannabis for personal use, and the potential Joe Biden re-election in the U.S. presidential election could spur robust growth across the sector. When he assumed power in 2021, cannabis stocks took off to the moon, with investors optimistic over federal-level legalization. It’s election year again, and the Biden Administration is aggressively pursuing cannabis reform in their 2024 ballot initiatives.
U.S. Vice President Kamala Harris recently pushed for the reclassification of cannabis from “Schedule I” to “Schedule III” drug. If this comes to fruition with the Drug Enforcement Administration (DEA) in the coming months, it could be a major step toward federal-level legalization. Furthermore, in his State of the Union address, President Biden talked about marijuana reform. Hence, with multiple tailwinds propelling the cannabis sphere, here are three of the best cannabis stocks to buy.
Cronos (CRON)
Cronos (NASDAQ:CRON) is a leading Canadian cannabis giant and one of the more popular names in its niche. Its stock is up 26% year-to-date (YTD). A lot of the optimism surrounding the company is linked to its fortress of a balance sheet. It ended last year with $862 million in its cash till, which is some feat considering its cash balance was at $2.6 billion in 2016. Its massive cash balance propels it to continue pursuing organic growth and strategic acquisitions.
Perhaps Cronos’ trump card is its expanding presence in Australia and Germany’s medicinal cannabis market. With easing regulatory headwinds in Germany, Cronos could be in for robust expansion ahead, tapping into a network of 200 pharmacies under its partnership with Cansativa GmbH. Moreover, it also boasts almost a 6% stake in PharmaCann, which could be another top-line growth driver, especially if the U.S. legalizes marijuana on a federal level.
Innovative Industrial Properties (IIPR)
Innovative Industrial Properties (NYSE:IIPR) is a leading real estate investment trust (REIT) that leases its industrial properties to experienced medical cannabis operators. Unlike other companies in its niche, it has operated a more stable and growing business marked by healthy historical growth in its adjusted funds from operations (AFFO). Its 5-year average AFFO growth stands at a spectacular 47%, increasing its dividend payout by an impressive 39% during the same period. Moreover, it yields a mouth-watering 7% while trading at just 11.34 times forward AFFO.
Furthermore, it has continued on an upward trend in recent quarters. It comfortably surpassed FFO and revenue estimates in its Q4 results, collecting 100% rent despite tenant-related issues in the past year. The REIT is committing a hefty $119.5 million in acquiring new properties, initiating new leases and adjusting existing leases, a testament to its forward-looking approach.
Grow Generation (GRWG)
Grow Generation (NASDAQ:GRWG) is a top retailer of hydroponic and cannabis cultivation equipment, which was once an incredibly rewarding investment. It reached a record-high price of $64.58 in February 2021, but has plummeting over 90% to $2.86 at the time of writing. GRWG gained plenty during the pandemic, with dispensaries being deemed essential globally, resulting in robust sales growth. However, the scenario has completely changed in 2024, with its top-line growth dropping at a worrying pace.
Nevertheless, the company’s outlook for sales and adjusted EBITDA in 2024 and 2025 points to stability and modest growth, with a likely return to positive adjusted EBITDA. Moreover, the company is in a relatively strong position with zero debt and $65 million in its cash till. On top of that, GRWG stock trades at a measly 0.8 times forward sales, 13% lower than its sector median. With interest rate cuts expected and a potential federal-level legalization scenario, GRWG stock will start climbing again.
On the date of publication, Muslim Farooque 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
