3 Cannabis Stocks Set for a High-Growth Comeback
Cannabis growth stocks have been riding a regulatory rollercoaster so far this year.
May ushered in a promising twist for cannabis stocks. With May came the initiation of the formal process to reclassify cannabis from a Schedule I to a Schedule III controlled substance. The key shift effectively set the stage for a robust rally in pot stocks. However, the landscape shifted in early July. Cannabis stocks pulled back after a House committee decided to block the Department of Justice from altering cannabis’s risk classification.
Stirring the pot further, the Cannabis Regulators Association (CANNRA) is seeking clarity from the DEA. The clarification is regarding the implications of the proposed reclassification of cannabis on a federal level. With these developments in play, the savvy investor will look to capitalize on the opportunity. They will then invest in the best cannabis growth stocks. The three discussed in the article present the most upside, with low downside risk.
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Cronos (CRON)
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Cronos (NASDAQ:CRON) is a Canadian cannabis player. They have taken a strategic pause in the United States to focus their efforts on Canada and Israel.
Despite the inherent growth limitations, the firm benefits from a narrowed focus. deriving 75% of its sales from Canada and the rest from Israel, a tightly controlled market. Moreover, it demonstrated commendable financial health, with $855.1 million in short-term investments and cash.
It recently posted superb operating results in the first quarter (Q1), with sales up by almost 30% to $25.29 million, beating expectations by $1.51 million. Moreover, its adjusted EBITDA loss narrowed significantly in Q1, improving by a superb $5 million.
As we look ahead, the firm is expected to continue growing upwards of 20% for the year as it inches closer to profitability. Analysts forecast a 5 cents net loss per share, a sizeable 74% improvement from 2023. Moreover, with positive legalization developments in the U.S., we might see Cronos back in the game, making waves in the green rush.
Innovative Industrial Properties (IIPR)
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Innovative Industrial Properties (NYSE:IIPR)is a stand-out cannabis player, unlike any of its peers in its niche. It operates as a specialized industrial real-estate-investment trust (REIT) focusing on cannabis properties. By the end of last year, IIPR’s robust portfolio included 108 properties across 19 states.
Perhaps one of IIPR’s major competitive advantages is that it operates as a triple net lease model. This approach effectively transfers the responsibility for taxes, insurance, and other fees to its tenants. Naturally, the framework results in greater profits for the company and its shareholders. To put things in perspective, IIPR has grown its funds-from-operations (FFO) by an average of 22% and 47% over the past three and five years, respectively.
Also, unlike its peers, it has been a superb wealth compounder, gaining over 54% in the past year alone. On top of that, it pays a growing dividend, yielding 6.25%, with 33.2% growth in payouts over the past five years.
Green Thumb Industries (GTBIF)
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Green Thumb Industries (OTCMKTS:GTBIF) is another top cannabis consumer packaged goods player that’s been making superb strides in growing its market share. The firm boasts a national presence and is known for its Rise dispensaries and extensive product line.
The biggest reason to include GTBIF in your portfolio is for its superb profitability profile, maintaining double-digit margins over the past several years. Its Q1 earnings print continued that trend, posting a 13 cents EPS, beating estimates by eight cents. Moreover, revenues of $275.8 million represented a healthy 11% increase from the prior-year period. Additionally, its financial upswing was strengthened further by its superior cash flow from operations, which surged 12% to $84 million. After Q1, it had a sizeable $224 million in its cash till.
Moreover, despite its promising growth trajectory, GTBIF stock trades at just 2.44 times forward earnings estimates, roughly 54% below its five-year average.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.
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