A few marijuana stocks to keep an eye on for the federal legalization
Senate Majority Leader Chuck Schumer proposed draft legislation to legalize cannabis at the federal level. Schumer feels that by next year, the country will have made meaningful progress in decriminalizing the substance. As a result, U.S. pot stocks could be looking at a big breakthrough from now until then.
This year, marijuana sales are expected to grow by 40% on a year-over-year (YOY) basis to $24 billion in the States. With cannabis already legalized at multiple state levels, you can expect that number to rise exponentially next year.
With that said, here are a few cannabis stocks that you should be paying attention to.
Hexo
If U.S. federal legalization goes through, it’s not just American cannabis companies that will benefit. Instead, Canadian marijuana stocks should benefit from full legalization as well.
Like other weed stocks on this list, Hexo has had an impressive growth strategy and boasted solid top-line numbers.
It even bought the recreational and medical marijuana producer Redecan, giving it one of the larger market shares in Canada.
Hexo had a strong showing in 2020, despite the pandemic. Revenues grew by double digits on a YOY basis for the year. Of course, sales did take a hit in the most recent quarter due to strain cultivation decisions and production troubles. However, HEXO stock is in an overall good position.
This is one of those underdogs to keep an eye on.
Tilray ($TLRY)
$TLRY has been on my watchlist for a while and I’ve wrote about it a few times in my past posts.
Tilray recently had its blockbuster merger with Aphria, making it the largest marijuana company by revenue. The company also has a top share in Canada’s $2.6 billion marijuana market. Additionally, Tilray has a robust international presence in countries such as Germany, Israel and Portugal. It is also building a robust supply-chain network in the States. $TLRY has generated a healthy 89% return in the past 12 months.
Trulieve ($TCNNF)
Another underrated cannabis stock to keep on your watchlist. With YOY revenue and EBITDA growth numbers exceeding 90%, it’s tough to pass up on TCNNF stock. The company owns assets in six states, the majority of which are located in Florida where it holds almost 50% of the medical cannabis market.
The company recently announced that it was acquiring another cannabis company, Harvest Health and Recreation. Harvest has a sizeable presence in the Arizona market and will complement TCNNF’s position in Florida. What’s more, both companies posted a handsome EBITDA profit in their first quarters and have grown their top lines incredibly in the past few years.
Curaleaf ($CURLF)
Curaleaf is the largest multi-state operator in the United States, with operations in 23 states and 106 dispensaries. The company has captivated investors with its aggressive growth strategy and stellar fundamentals. It has also performed incredibly well in the past year, with revenue growth estimates at over 107% year-over-year (YOY). Yet, despite its spectacular performance, CURLF stock trades at just 7.02 times forward sales.
This company started the year off with a bang, posting eye-catching numbers in its first-quarter results. For one, Curaleaf saw triple-digit top-line growth, with revenues growing 170% on a YOY basis and 213% for adjusted EBITDA. Moreover, it ended the quarter with a healthy $315 million in cash and just $340 million in debt.
One key thing to note about trading cannabis stocks is that the sector moves as a whole most of the time. Once the steam picks up, all of the stocks in this sector will follow and the price action could be extreme. We’ve seen this happen in the past multiple of times.
Good luck all!
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