Marijuana legalization in the United States is getting closer, and marijuana stocks are set to benefit. President Joe Biden appears to be warming to the idea of legalization at the federal level, and a House of Representatives committee approved a bill in early March that would decriminalize possession of all currently illicit drugs and promote investments in substance abuse treatment.
At the same time, several U.S. states continue to legalize recreational use of marijuana, with New York being the latest to consider taking action on the issue. Several states in the southern U.S., including Alabama and Georgia, are aggressively moving to legalize both recreational and medical marijuana.
Here are seven marijuana stocks to buy as the south, and other regions of the U.S., go green:
Data last updated: March 24, 2021 2:10 PM EDT
Marijuana Stocks to Buy: Tilray (TLRY)
Tilray stock has been on a rollercoaster lately after it was targeted by the r/WallStreetBets Reddit mob. TLRY stock jumped 237% at the beginning of February, rising from $19 a share to just under $66. Of course, the boost didn’t last. Buyers quickly became sellers, and Tilray stock fell back as low as $21.63 per share. While the share price has slowly been recovering in recent weeks on news of U.S. legalization efforts, it remains under $30.
The drama of the share price aside, there is reason for investors to feel optimistic about TLRY stock. The main reason for optimism is the upcoming merger with rival Aphria (NASDAQ:APHA) in a $4 billion deal that will make Tilray one of the biggest marijuana producers in terms of production and revenue.
The merger has caused many analysts to turn bullish on Tilray stock. Analysts also like the steps that Tilray has taken to reconfigure its operations ahead of the Aphria merger, cutting 10% of its workforce and closing several production facilities to streamline its operations.
Sundial Growers (SNDL)
Sundial Growers has been “the little marijuana stock that could” so far in 2021. SNDL stock began the year at just 55 cents a share and was being threatened with delisting by the Nasdaq stock exchange.
However, the share price skyrocketed 436% to a peak of $3.04 in early February. Like Tilray, Sundial Growers’ jump was due to a short squeeze by traders who congregate on Reddit. The stock has since come back down to earth and now trades at about $1.20 per share.
As with Tilray, Sundial Growers has some substance. For one, the company is aggressively expanding into edible marijuana products, a relatively new segment and one that is growing quickly. Additionally, the company is planning to raise more capital with a secondary stock issue. And, best news of all, SNDL stock has avoided being delisted.
One of the steadiest and most consistent marijuana stocks year-to-date has been Denver, Colorado-based GrowGeneration. And for good reason. The company is the largest retail distributor of all the equipment needed to grow marijuana, both on large and small scales.
GrowGeneration products include everything from marijuana seeds to the lighting, nutrients, trays, fans, filters, humidifiers, water pumps and hand tools needed to cultivate the recreational drug. People who consume marijuana don’t need GrowGeneration, but the people and businesses that grow the plant for commercial purposes do.
Between the start of this year and mid-February, GRWG stock rose 74% to a 52-week high of $67.75. The share price has since retreated about 22%, but still trades right around $50. Investors looking for exposure to the marijuana sector should like GrowGeneration’s competitive advantage and unique position as the largest supplier of the equipment needed to grow marijuana. They should also like that the company is at the forefront of a multi-billion dollar industry that is expected to grow exponentially in coming years.
Canopy Growth (CGC)
The biggest of the Canadian marijuana producers remains Canopy Growth. And while the Smiths Falls, Ontario-based company remains unprofitable and continues to take steps to improve its financial situation, there is reason to think that Canopy Growth is turning its fortunes around. The company has announced that it should be profitable in the second half of next year (2022).
Canopy Growth also just announced plans to lay off 75 people in Canada and cut dozens more positions in Denmark as the company winds down operations in that Scandinavian country. Investors should take heart from the fact that the company continues to focus on rightsizing its operations in order to reach still-elusive profits.
After reaching a 52-week high of $56.50 in February, CGC stock has pulled back 43% to its current price of about $32 a share. While it might seem like a scary drop, CGC’s share price fell mainly do to a broad pullback among all marijuana stocks.
However, since the latest marijuana legalization news was announced in the United States, Canopy Growth stock has rallied some and looks to have more runway ahead of it. Investors should look to grab shares of Canopy Growth on the dip before it runs up to its 52-week high or above.
Now we turn to a more diversified marijuana producer in Hexo, a Canada-based company that specializes in medical cannabis products, as well as cannabis oils, sub-lingual sprays, marijuana powder and dried flowers. Hexo also distinguishes itself with its international reach, selling its medical cannabis products throughout Europe and in Israel.
While the company’s strategic partnership with beer maker Molson Coors (NYSE:TAP) failed and resulted in production closures, the experience does not seem to have deterred Hexo. The company announced in mid-February that it is acquiring competitor Zenabis Global for $235 million that will further expand its European operations.
HEXO stock has been one of the best performing among marijuana companies this year, up 82% since the first trading day in January at $6.70 a share. Many analysts are now talking up the stock as excitement around U.S. legalization grows, citing the company’s diversification and international reach as positive attributes that set Hexo apart from the glut of other marijuana stocks on the market today.
Aurora Cannabis (ACB)
Edmonton, Alberta-based Aurora Cannabis has seen improving sales and earnings in recent quarters and that has helped the company’s stock appreciate significantly year-to-date. ACB stock nearly doubled at one point this year, rising 90% to nearly $20 a share. While it has since pulled back, the share price remains up 58% since it bottomed in May 2020 at $5.80 a share.
Aurora Cannabis is trying to distinguish itself from the competition by developing premium marijuana products that sell at higher prices. Whether the move to premium cannabis items will succeed remains to be seen. But there is reason to be excited about Aurora Cannabis and its stock, notably because of the expansion of its medical marijuana products.
Cronos Group (CRON)
CRON stock has increased 36% so far in 2021 at $9.41 a share, and is one of the more stable marijuana stocks. No short squeezes here. The stock has more than doubled in price since last May when it bottomed along with the rest of the industry. The Toronto-based company has distinguished itself with its focus on cannabidiol (CBD) items that it positions as “wellness” products. This includes dried cannabis, vape, oils and various cannabis infused products.
Cronos Group is also in a stable financial position, with more than $1 billion in cash and investments. The company also has virtually no debt, and, for the fourth and final quarter of 2020, Cronos Group reported sales of $17 million, above third-quarter sales of $11.4 million and 133% higher than a year earlier. Fourth-quarter revenue also beat the $13.8 million that had been expected by analysts.
While Cronos Group is not yet profitable, its business is clearly growing and the company has announced plans to begin developing laboratory-grown marijuana products, which will help it reduce prices significantly and become more competitive.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.