Downtrodden pot stocks have potential for serious growth.
Despite legislative holdups in the U.S., the cannabis industry is living the high life. According to an industry market forecast from BDSA, a provider of retail sales data for the industry, global cannabis sales for 2022 will surpass $35 billion, an increase of 22% over 2021. In the U.S., the outlook for marijuana stocks is more modest. So far, 37 states, three territories and the District of Columbia have approved cannabis products for medical use. Recreational use is legal in 19 states, D.C. and two territories. Despite two recent attempts by the U.S. House of Representatives to pass legislation for legalization at the federal level, cannabis products are still classified as Schedule I substances under the Controlled Substances Act, and their use is prohibited by federal law. However, laws can change, and many analysts believe that the marijuana industry has plenty of room for growth. If you want to invest in this budding industry, here are seven of the best marijuana stocks to buy in 2022.
Cresco Labs Inc. (ticker: CRLBF)
Cresco Labs is a multistate operator, or MSO, based in the U.S. and is a leading wholesaler of branded cannabis products. As of 2022, it also operates 50 retail stores, and its products are sold by over 1,100 dispensaries. For the first quarter of this year, it reported revenue of $214 million, a 20% increase year over year. Cresco Labs’ stock price has taken a big hit in over-the-counter, or OTC, trading so far in 2022. However, Cresco recently announced its $2 billion acquisition of Columbia Care Inc. (CCHWF), one of the largest MSOs in the medical cannabis industry. This could put Cresco Labs in a solid position as the marijuana industry continues to grow.
Cronos Group Inc. (CRON)
Headquartered in Toronto, Cronos Group was the first cannabis stock to list on the Nasdaq in February 2018. It sells both medicinal and recreational marijuana products under four brands. While it sells dried cannabis, vaporizers and edibles in some countries, it’s limited to hemp-derived supplements in the U.S. Cronos’ stock price has experienced significant declines since last August, dropping more than 50%. However, Cronos has positioned itself well for expansion in the U.S., and in 2021 it announced that it had purchased an option to acquire a 10.5% ownership stake in PharmaCann. Depending on developments with the U.S. federal cannabis laws, it could exercise this option and use PharmaCann to offer its products.
OrganiGram Holdings Inc. (OGI)
OrganiGram Holdings is a leading licensed provider of medical and recreational marijuana in Canada. It has a sales and distribution network throughout the 10 Canadian provinces and the territory of Yukon, but it also serves Israeli and Australian medical markets. In the third quarter of its 2022 fiscal year, OrganiGram Holdings’ net revenue reached $38.1 million Canadian dollars ($29.5 million), up 88% from the same prior-year period. Like other marijuana stocks, OGI has underperformed year to date; it’s down more than 30% as of Aug. 12. However, OrganiGram has made significant investments in its facilities, automation and processes to be more cost-efficient as it grows. It has also introduced promising new products to its profile. With CA$127 million ($98.5 million) in cash and short-term investments and a negligible amount of debt, OrganiGram could be a solid choice for marijuana investors.
TerrAscend Corp. (TRSSF)
A leading cannabis producer in North America, TerrAscend has operations in California, Maryland, New Jersey and Pennsylvania. As of the second quarter of 2022, its gross profit margin was 35.5%, up from 30.4% in the first quarter. In 2022, TerrAscend expanded its facilities and received a home delivery license for medical patients in New Jersey. “We grew revenue 31% sequentially for the second quarter as New Jersey adult-use sales got off to a great start,” said Jason Wild, executive chairman of TerrAscend. The company also recently announced agreements to acquire dispensary operators in Michigan and Maryland, expanding its reach. The stock has tumbled year to date, but investors who think marijuana will make a resurgence may find TerrAscend to be a leader on that front.
Trulieve Cannabis Corp. (TCNNF)
Trulieve Cannabis Corp. is an MSO that operates in 11 states, particularly in Arizona, Florida and Pennsylvania. It was the first medical marijuana operator to be licensed in Florida, and as of May 2022, it had more than 165 retail dispensaries and more than 9,000 employees. Although Trulieve’s share price on the OTC market is down about 50% this year as of Aug. 12, it reported revenue of $320.3 million in the second quarter, an increase of 49% year over year. With its $2 billion acquisition of Harvest Health & Recreation Inc. in 2021, Trulieve is well positioned if Florida legalizes recreational marijuana in the coming years. Cantor Fitzgerald, an equity research analyst firm, has set a 12-month price target of $54 for TCNNF, which closed at $13.15 on Aug. 12, suggesting about a 310% potential upside.
Verano Holdings Corp. (VRNOF)
Verano is an MSO based in Chicago that produces a suite of cannabis products, including vape cartridges, edibles, pain relief balms and lotions. Verano has underperformed on the OTC market lately, dropping about 55% since the start of the year. However, it is expanding operations in Florida, one of the biggest marijuana markets in the country, opening its 55th location in the state in August. Its active operations span 13 states, with more than 100 dispensaries and 13 cultivation and processing facilities. Verano Holdings is one of the five largest MSOs in the U.S. based on revenue, so a legislative turn of events could pay off for investors.
Village Farms International Inc. (VFF)
Village Farms International is one of the largest controlled environment agriculture, or CEA, growers in North America. Launched in 1989, Village Farms expanded into the Canadian recreational cannabis market in 2017 and made inroads in the U.S. in 2018. However, Village Farms still operates its produce division, which grows vegetables in Canada, Texas and Mexico, and this makes up more than 50% of its sales. Its diversified business portfolio may be appealing to investors. And although produce is a significant portion of its business, Village Farms’ cannabis segments are growing. It had $28.8 million in cannabis sales in the U.S. and Canada in the first quarter of 2022, up from just $17.4 million for the same prior-year period. Its adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, also increased slightly year over year during a difficult economic environment.
7 of the best marijuana stocks to buy in 2022:
— Cresco Labs Inc. (CRLBF)
— Cronos Group Inc. (CRON)
— OrganiGram Holdings Inc. (OGI)
— TerrAscend Corp. (TRSSF)
— Trulieve Cannabis Corp. (TCNNF)
— Verano Holdings Corp. (VRNOF)
— Village Farms International Inc. (VFF)
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7 Best Marijuana Stocks to Buy in 2022 originally appeared on usnews.com
Update 08/15/22: This story was published at an earlier date and has been updated with new information.
