These are the top publicly traded Canadian pot stocks.
There are few things investors love more than an entire industry that’s growing rapidly, and that’s precisely what the legal marijuana market is today. Although still federally illegal in the U.S., a flurry of states have been decriminalizing or outright legalizing marijuana for medical and recreational use in recent years. In Canada, recreational cannabis use was federally legalized in 2018, allowing a number of legitimate pot companies to spring up, many of which went public. Canadian pot stocks are the best way for U.S. investors to gain exposure to the global expansion of legal marijuana, a market that experts see growing by roughly 18% annually between 2020 and 2027. Although most of them look expensive by traditional metrics and few are consistently profitable, here’s a look at eight of the premier Canadian marijuana stocks of 2021.
Aurora Cannabis (ticker: ACB)
The $2 billion Aurora Cannabis is one of Canada’s earliest publicly traded weed stocks, and in recent quarters it has been putting up attractive growth numbers in its medical cannabis business. In its last fiscal quarter, which concluded at the end of December, medical cannabis revenue rose 42% year over year, as its international medical cannabis sales boosted growth, soaring 562%. Aurora’s consumer cannabis division is also growing, rising 25% last quarter compared to the same period in the prior year. That division sells things like vapes, edibles and concentrates directly to consumers.
One of the larger companies on this list with a market capitalization of around $6 billion, Aphria is also one of the few Canadian marijuana stocks that have been profitable in the last year. Up about 700% year over year, shares have recently been hitting all-time highs as they’ve rallied off early 2020 lows. Along with Aurora, APHA is one of only two Canadian marijuana stocks highlighted here with profits over the last 12 months, and it trades for about 60 times trailing earnings. Aphria’s revenue for its last reported six-month period rose 24% from the same period a year before, as the marijuana industry continues to boom.
Canopy Growth Corp. (CGC)
Far and away the largest of the Canadian marijuana stocks by market cap, Canopy Growth is worth more than $12 billion. An international business with operations in Canada, the U.S., Germany and the United Kingdom, Canopy Growth is a vertically integrated business, producing, distributing and selling marijuana. Like most of its direct competitors mentioned in this piece, CGC owns a handful of different brands it markets products under, and it doesn’t just sell marijuana — the company sells oil, concentrates, CBD and capsules. Companies like Canopy Growth with established operations in the U.S. already, and the resources to expand, should be the biggest beneficiaries should marijuana legalization come to fruition in the States.
Cronos Group (CRON)
Cronos reported the highest revenue growth of any major Canadian pot stock last quarter, as its top line soared 133% in the fourth quarter of 2020. Growth was driven by blockbuster expansion in non-U.S. markets, where sales nearly tripled, going from $4.6 million to $13.5 million year over year. Specifically, the Israeli medical marijuana market and Canada’s own adult-use market drove much of that increase. While growth rates this high are certainly hard to find, CRON stock is by no means priced cheaply, with its $3.65 billion market cap representing a price-sales ratio of about 75.
OrganiGram Holdings (OGI)
One of the smallest of these Canadian marijuana stocks by market cap, OrganiGram is worth about $930 million. In part due to its small size, OGI stock tends to be one of the more volatile names on this list, and trades for less than $5 a share. To that point, OGI is a somewhat speculative play, as it will need to execute extremely well to hold its own against larger players. Also, business hasn’t been booming recently, despite the rapid expansion of the larger market itself: sales fell 23% last quarter. A newly announced deal, in which British American Tobacco (BTI) took a 19.9% equity stake in OGI, sent shares spiking, but that alone doesn’t make OGI a best-in-class pot stock. It may be best to take a wait-and-see approach with OGI for now.
Sundial Growers (SNDL)
If you were a close follower of the recent Reddit-fueled stock trading craze, you may recognize Sundial Growers, which was catapulted from a 52-week low of 14 cents a share to a peak of $3.96 per share amid February’s mania. The stock has since given up a big chunk of those obscene gains and receded to a more reasonable level around $1.40 per share. Although not currently profitable, there are some reasons to like Sundial’s prospects; the company is shifting from wholesale to retail operations, the latter of which tends to be much higher-margin. This pivot is one reason analysts expect the company’s loss per share to dwindle from $1.51 in the trailing 12 months to a per-share loss of just seven cents in 2021.
The largest marijuana company in the world by revenue, Tilray is legitimately one of the big players in the cannabis game. With operations in 16 different countries, TLRY has a global exposure to the long-term expansion of the marijuana industry. Tilray focuses on medical cannabis, and most recently entered the New Zealand market, as regulators in that country approved Tilray to begin selling medical marijuana there. Being a well-capitalized early entrant in a number of global markets should give TLRY enviable competitive advantages over slower rivals, and its upcoming merger with Aphria will create a new powerhouse among Canadian pot stocks.
HEXO Corp. (HEXO)
HEXO is a small-cap Canadian cannabis stock, worth about $900 million. Not one to break with the wider M&A-heavy industry trend, HEXO agreed in February to acquire the smaller Zenabis Global for 235 million Canadian dollars in an all-stock transaction. It was a savvy move, not only because scale is so important in this industry, but because HEXO shares were trading near 52-week highs, so taking what the market was offering and using its newly inflated share price to make an acquisition is just “good business.” The Zenabis acquisition is expected to accomplish two important things for HEXO: It makes it the third-largest licensed recreational cannabis company in Canada, and it gives it overnight exposure to Europe’s medical marijuana market.
Best Canadian marijuana stocks:
— Aurora Cannabis (ACB)
— Aphria (APHA)
— Canopy Growth Corp. (CGC)
— Cronos Group (CRON)
— OrganiGram Holdings (OGI)
— Sundial Growers (SNDL)
— Tilray (TLRY)
— HEXO Corp. (HEXO)
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