Best cannabis stocks: touching new highs or taking a bad trip?

18:23, 18 January 2022

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Best cannabis stocks: touching new highs or taking a bad trip?

Originating from the Cannabis plant, marijuana or cannabis is a psychoactive drug. Once considered highly taboo, cannabis has now been legalised in several countries for recreational and medicinal purposes. Read on as we dig deeper into this industry and review the list of cannabis companies to analyse the cannabis stocks market.

Legalising the drug: a US view

Cannabis has emerged as a multi-billion-dollar industry in recent times, particularly in the US, where the push for legalising marijuana has been immense.

As per a Statistica report on 15 September 2021, the US is the global leader in respect to the legal cannabis stock market and investment; by 2024, according to the findings, the US market for legalised cannabis is expected to be worth over $31bn. 

In distant second place behind the US for marijuana consumption is Canada, where the market for legalised cannabis is expected to touch over $6.2bn by 2024.

Legal cannabis spending (2018-2024)

A recent survey by Gallup found that since 2020, a record high number of Americans (68%) have been affirmative in their support for making marijuana legal. At a government level, several marijuana-related bills have been introduced in Congress to further the agenda of decriminalising the drug. As of now, recreational marijuana is legal across 18 states and US territories, including Guam and the nation’s capital, Washington, DC.

While the US as a country has the autonomy to set specific guidelines pertaining to cannabis possession by its citizens at a federal level, cannabis continues to be tagged as a Schedule I drug by the US Drug Enforcement Administration (DEA).

Bar graph for legalising marijuana in the US (1969 to 2021)

A cure for Covid-19?

In the latest cannabis stock news, a scientific research paper by the Oregon University has gone viral on numerous social media platforms. The study, published in the peer-reviewed academic Journal of Natural Products, claimed Cannabidiolic acid (CBDA – a cannabinoid found in cannabis plants) and Cannabigerolic acid (CBGA – the acidic form of cannabigerol) acids commonly found in the hemp varieties of cannabis can bind to the spike protein of SARS-CoV-2 and prevent the entry of the live Covid-19 virus into human cells.

Richard van Breemen, a professor of pharmaceutical sciences at Oregon State and the study’s lead author, said:

“These compounds can be taken orally and have a long history of safe use in humans. They have the potential to prevent as well as treat infection by SARS-CoV-2.”

Bloomberg’s post on Twitter confirming the study gained over 13,700 retweets as users took to social media rejoicing at this news. However, the study is still in its nascent stage with further developments expected in the days to come. 

Associate epidemiology professor Silvia Martins, who is the director of the Substance Use Epidemiology Unit at Columbia University’s Mailman School of Public Health, warned readers to “be very cautious of any overinterpretation or social media frenzy”.

Tracking 5 cannabis stocks

According to data compiled by CompaniesMarketCap, as of 17 January 2022, the following are the biggest stocks to invest in the cannabis industry, based on market capitalisation metrics. While most cannabis stock prices dragged down in 2021, in this article we will zoom in on some of the top marijuana stocks.

  1. Curaleaf

At the head of the pack, thanks to its industry-renowned cannabis production and selection across adult markets for medical marijuana stocks, is Massachusetts-headquartered Curaleaf. 

Driven by its mission to build public confidence around cannabis consumption, the company operates in 23 states with 101 local dispensaries, over 350,000 registered patients and over 1,150 active wholesale dispensary accounts. It currently trades on the Canadian Securities Exchange (CSE: CURA) as well as on the OTCQX platform, a division of the OTC Markets Group (OTCQX:CURLF).

On 28 December 2021, the company announced it has entered into an agreement to acquire Arizona-based Bloom Dispensaries for $211m, which Curaleaf sees as a strategic acquisition to further its presence in the Arizona market. The transaction is expected to close in January 2022.

In its Q3 2021 financial results, published on 8 November 2021, the company reported revenues of $317m. As compared to Q3 2020 revenues of $182m, the year-on-year growth has been approximately 74%. 

According to executive chairman Boris Jordan, the company remains on track to achieve its annual revenue guidance at the lower end of $1.2bn–$1.3bn.

However, on the OTCQX platform, following its closing price of $14.16 on 8 January 2021, the stock has plummeted by 41.87% to $8.23 as of 14 January 2022.

Curaleaf stock price chart

As per the algorithm-based forecasts on Wallet Investor, the CURLF stock price could close at $24.349 by December 2027, five years from now. 

As per data compiled by TipRanks, nine analysts have given the stock a ‘buy’ rating while two have maintained a ‘hold’ stance. ‘Buy’ advocates include Owen Bennett, senior vice president, equity research at Jefferies, who gave the stock a ‘buy’ rating and a price target of CAD30 ($23.97) as of 23 November 2021.

The average price target is $18.64 – 126.49% on the upside of the last close price of $8.23.

  1. Trulieve Cannabis

Headquartered in Florida, this Canada-based cannabis company aims to provide the highest level of cannabis products and “compassionate care customers can trust when traditional medicine is not enough”. Now operating in 11 US states with almost 150 dispensaries as of October 2021, it holds a particularly strong market position in Arizona, Pennsylvania and Florida.

On 22 November 2021, the company announced its launch of THC-infused dark- and milk-chocolate bars in partnership with Bhang, an award-winning gourmet chocolatier. (THC – short for Tetrahydrocannabinol – is the principal psychoactive constituent of cannabis and one of at least 113 total cannabinoids identified in the plant.) According to Bhang CEO and president Jamie Pearson, orders for the cannabis-infused chocolates have exceeded their expectations. 

A day after this launch, the Trulieve (TRUL) stock rallied by 4.87% from the closing price of CAD34.85–CAD36.55.

Trulieve Cannabis stock price chart

In its Q3 2021 financial results published on 15 November 2021, the company reported gross profits of $153.9m, representing a growth of 50.58% from its Q3 2020 gross profits of $102.2m.

Algorithm-based Wallet Investor is bearish on the TRUL stock and depicts the closing stock price at $12.711 by December 2022. Furthermore, it expects the stock to close at $0.000001 by January 2024.

On 7 January 2022, Wolfe Research analyst Greg Badishkanian initiated coverage on Trulieve with an ‘outperform’ rating. He believes that while the company may be overexposed in the Florida market, its history of maintaining share and store locations should help its pricing power. He gave the stock a price target of CAD42.

As per data compiled by TipRanks, seven analysts have given the stock a ‘buy’ rating. The average price target is CAD84.69, 165.82% on the upside of the last close price of CAD31.86.

  1. Green Thumb Industries

Founded in 2014, this Chicago, US-headquartered company offers people quality cannabis through its branded portfolio of products. These include ‘luxury’ marijuana brand Beboe, the socially conscious Good Green, Rythm vaping products, Dogwalkers pre-rolls, Incredibles edible products, Doctor Solomon’s lotion, etc. The company now has operations across 14 US markets and reports that its retail cannabis dispensaries, Rise, are experiencing rapid growth.

On 10 November 2021, the company published strong Q3 2021 financial results, with reported cash earnings of $285.8m at quarter-end, marking the seventh consecutive quarter of positive cash flow from operations. The company reported top-line revenue of $233.7m, a 5.3% sequential increase over Q2 2021 revenues of $221.8m.

A day after the Q3 2021 results were published, the Green Thumb (GTII) stock rallied by almost 16% from CAD21.80 to CAD25.28.

Green Thumb Industries stock price chart

Wallet Investor’s algorithm-based forecast for the GTII stock price suggests it could close at CAD30.910 by December 2027, five years from now. Jefferies’ Bennett gave the stock a ‘buy’ rating and a price target of CAD70 on 7 July 2021.

As per data compiled by TipRanks, eight analysts have given the stock a ‘buy’ rating. The average price target is CAD60.41, 135.24% on the upside of the last close price of CAD25.68.

  1. Canopy Growth

Formerly known as Tweed Marijuana, this cannabis company was founded in 2013 and is headquartered in Smith Falls, Ontario. The company, which believes in harnessing the power of cannabis, trades under the WEED ticker on the Toronto Stock Exchange and under CGC on the NASDAQ Global Select Market.

On 17 November 2021, Canopy Growth launched its new product range of premium flower offerings across its 7 ACRES, 7 ACRES Craft Collective and Doja Brands. While the products were launched to meet what the company expressed as the “growing demand of the Canadian flower market”, the stock market response was cooler than anticipated.

A day after this product lineup was announced, the stock fell by 9.19% on the NASDAQ platform, dropping from $13.60 to close at $12.35. Since then, the stock has fallen further by 31.98% to its current close price of $8.40 at the time of writing on 17 January 2022.

Canopy Growth stock price chart

Algorithm-based Wallet Investor is bearish on the CGC stock and depicts the closing stock price at $0.000001 by May 2024. Furthermore, it expects the stock to close at $0.0000771 by December 2022.

Gaurav Jain, a consumer analyst from Barclays, gave the stock an equal weight rating and a price target of $14 on 18 November 2021.

According to data compiled by TipRanks, six analysts have given the stock a ‘sell’ rating, five have recommended a ‘hold’ and one has suggested a ‘buy’. The average price target is $11.46, a 41.48% change from the last close price of $8.11.

  1. Tilray

The first good manufacturing practice (GMP)-certified medical cannabis producer, Tilray (TLRY) was also the first Canadian cannabis company to export medical cannabis legally to the US for a clinical trial in 2018. It now has a global footprint in seven countries, building on its expertise in cannabis research, cultivation, processing and distribution.

On 3 May 2021, Tilray announced completion of its merger with another cannabis-centric consumer packaged goods (CPG) company, the Leamington, Ontario-based Aphria. 

Irwin Simon, Tilray’s chairman and CEO, commented:

 “Our focus now turns to execution on our highest-return priorities including business integration and accelerating our global growth strategy.”

As seen in the company’s Q2 fiscal year 2022 financial results published on 10 January 2022, its net revenue jumped by approximately 20% to $155m from $129m in its prior-year second-quarter revenues.

According to Wallet Investor, the NASDAQ-listed TLRY stock price could close at $9.156 by 13 January 2027, five years from now. 

Analyst Vivien Azer, managing director of Cowen and Company, gave the stock an ‘outperform’ rating and a price target of $23 as of 10 January 2022.

As per data compiled by Market Beat, three analysts have given the stock a ‘buy’ rating, nine have recommended to ‘hold’ while one suggested to ‘sell’. The average price target is $12.54, 90% on the upside of the last closing price of $6.86 on 17 January 2022.

Tilray stock price chart

When considering whether to invest in the cannabis stocks, you should always do your own research, including considering the outlook and relevant market conditions. A number of factors can impact whether stock prices rise or fall – for example, the company’s fundamentals and broader macroeconomic factors. 

There are no guarantees – markets are volatile. You should conduct your own analysis, taking in such things as the environment in which the stock trades and your personal risk tolerance. Also, never invest money that you cannot afford to lose.

FAQs

The five largest publicly traded marijuana companies by market capitalisation as of 17 January 2022, according to CompaniesMarketCap, are: Curaleaf, Trulieve Cannabis, Green Thumb Industries, Canopy Growth and Tilray.

The cannabis sector has seen some significant pullbacks in 2021. One of the reasons for this has been a slowdown in the process of legalising cannabis use in the US.

However, whether investing in cannabis stocks is a suitable investment for you depends on your own investment objectives.

Read more: Ocugen (OCGN) stock forecast: Awaiting regulatory approval

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