Five Cannabis Stocks to Consider When Investing in the Sector
Cannabis, or marijuana, is cultivated worldwide and has medicinal, recreational, and industrial uses. The recreational segment is further divided into edibles and topicals. A shorter, branchier variety of the plant is the main source of the psychoactive substance tetrahydrocannabinol (THC). North America is the largest market for legal cannabis, with a 96.8% share in 2020.
The Global Cannabis Market
The global cannabis market has grown exponentially in recent years and, despite the current slump, is poised to continue growing in the coming years as more countries legalize cannabis and formalize its production. BDSA Analytics expects a yearly increase in global sales of 22%, reaching $35 billion this year, reports Forbes. Fortune Business Insights estimates that by 2028 the cannabis market will be worth over $197 billion, based on a CAGR of 32.04% from 2021-2028. In terms of challenges, a key factor in the current drop in the market has been delays in reforms by the United States. Access to funding, high tax rates, and the illegal cannabis market are other important limiting factors. Globally, Fortune Business Insights expects resistance to legalization in Asia and the Middle East to be restraining factors for the cannabis market.
The U.S. is the largest market for legal cannabis, followed by Canada. In 2021, the U.S. legal adult-use cannabis market amounted to $16.5 billion. Within the country, California is the leading state, with $4.4 billion in sales in 2020. California has followed overall cannabis market trends, seeing sales rise by more than 300% compared to 2018. Over 50% of adults in adult-use legal states claim to have used cannabis in the last six months, reports BDSA. The researcher expects New York, New Jersey, Florida, and Michigan to make the biggest contribution to sales by 2026.
Important developments are happening outside of North America as well. Germany, Europe’s largest economy, is considering legalization. Allowing for recreational use could make the country one of the biggest markets and a trendsetter for other European countries. Medical cannabis represented the majority of the $103.5 million legal market in Europe in 2020. Mexico legalized personal use in 2021; however, the country doesn’t allow recreational sales. The Latin American market is expected to grow from $7.3 billion in 2020 to $44.8 billion by 2025.
How to Invest in Cannabis
Currently, the cannabis market is experiencing a downturn, with many major companies going in the negative in the past 12 months. However, some investors see this as an attractive entry point for an industry that is poised for growth. If you are looking to invest in cannabis in 2022, here are five options in the market.
1. Curaleaf Holdings Inc. (CSE:CURA, OTCQX:CURLF)
Curaleaf Holdings is a large Massachusetts-based holding company with both cannabis and non-cannabis operations. The cannabis segment produces, distributes, and sells the product, while the other segment provides cannabis-related services, including cultivation, IP licensing, and lending facilities, among others.
CURA was the biggest producer in the cannabis market in 2021, with a market cap of $8.7 billion. The company currently has a market cap of $5.81 billion and a stock price of $6.25
as of August 26, 2022, compared to $11.91 on August 30, 2021. In Q2 2022, CURA’s retail revenue increased by 13% to $252 million compared to Q2 2021. This rise in revenue was mainly due to the opening of 28 new stores across the United States.
2. Canopy Growth Corp. (NASDAQ:CGC, TSX:WEED)
Ontario-based Canopy Growth is another major producer of marijuana, with a market cap of $1.85 billion. The global wing of the company produces, distributes, and sells a wide range of cannabis and cannabinoid products in the domestic and international markets. Its other consumer products sector produces and sells products by BioSteel, Storz & Bickel, and other brands, covering the treatment of seizures, chronic pain, and other medical conditions.
CGC’s brands include Doja, 7ACRES, and Tweed. During FY 2022, the company announced its plans to acquire leading North American edibles brand Wana Brands and California-based Jetty Extracts. During FY 2023, CGC plans to strengthen its premium brands Doja and 7ACRES. The company has a stock price of $3.49 as of September 2, 2022, a year-over-year drop from $16.97 on September 3, 2021.
3. Green Thumb Industries (OTCQX:GTBIF, CSE:GTII)
Green Thumb Industries Inc. is a Chicago-based manufacturer, distributor, and seller of cannabis consumer packaged products and owner of RISE dispensaries. The company recently announced Q2 2022 results, reporting revenue of $254.3 million, a 4.8% sequential and 14.6% yearly increase.
Green Thumb sells under the brand names RHYTHM, Dogwalkers, Incredibles, Beboe, Doctor Solomon’s, and Good Green. GTBIF has a market cap of $3.14 billion and a stock price of $17.10 on September 2, 2022, a nearly 53% drop from September 2, 2021 ($36.20).
4. 4Front Ventures (CSE:FFNT, OTCQX:FFNTF)
Arizona-based 4Front Ventures is a multi-state cannabis cultivator, manufacturer, and retailer that operates through its CBD and THC segments. The THC segment focuses on production, distribution to retailers and its own dispensaries, and ancillary services. The CBD segment is focused on non-THC products. In its Q2 2022 financial results, the company reported revenue of $28.4 million, a year-over-year increase of 5%.
FFNTF’s portfolio includes Crystal Clear, Pure Ratios, Funky Monkey, and several other brands. The company sells its products through retail outlets and its chain of Mission Dispensaries located in Illinois, Michigan, and Massachusetts. 4Front has a market cap of $343.8 million and a stock price of $0.73 as of August 26, 2022, compared to $1.04 on August 31, 2021.
5. Tilray Brands Inc. (NASDAQ:TLRY, TSX:TLRY)
Ontario-based Tilray Brands, Inc. is a global cannabis and hemp products brand that focuses on the medical and lifestyle markets. With a market cap of $2.05 billion, TLRY is one of the big players in the market. The company’s clients include wholesalers, retailers, healthcare professionals, and more.
Trilray has several brands, including Aphria, Good Supply, B!NGO, SweetWater, and Tilray. The company’s Q4 net revenue increased by 8% to $153 million in 2022 compared to the previous year’s Q4. TLRY is trading at $3.98 as of August 29, 2022, representing a 69.65% decrease during the last year.
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