The U.S. cannabis business has been booming of late, and because of this, marijuana stocks continue to be a topic of interest on Wall Street.
We saw how the sector benefited from the novel coronavirus pandemic-induced tailwinds and hit a record $17.5 billion in sales. However, those numbers pale compared to the $31 billion the sector is estimated to generate this year. Though cannabis sales have been on fire, marijuana stocks haven’t performed, especially during the second half. President Joe Biden has been relatively slow in embracing cannabis reform, which has investors worried about future prospects.
Moreover, federal reforms are likely to supercharge growth for the sector next year. However, marijuana producers with robust fundamentals and those that can capitalize on the sector tailwinds are likely to reign supreme. On top of that, the longer regulatory timelines will finally allow the more promising marijuana stocks to cement their positioning in the sector.
Nevertheless, with multiple growth catalysts in place, I expect an even stronger showing for marijuana stocks in 2022. And with that in mind, these are some of the best ones you could pick to start the year on a high.
Sundial Growers (NASDAQ:SNDL)
Cresco Labs (OTCMKTS:CRLBF)
Green Thumb Industries (OTCMKTS:GTBIF)
Trulieve Cannabis (OTCMKTS:TCNNF)
Now, let’s dive in and take a closer look at each one.
Marijuana Stocks To Buy: Sundial Growers (SNDL)
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I recently covered Sundial Growers and felt it still has much to prove to its investors in terms of its fundamentals. However, one can’t argue with the momentum it’s riding after a solid third quarter, where gross revenues were up 57% quarter-over-quarter and up 12% year-over-year (YOY).
Moreover, its acquisition — liquor store chain Alcanna — expects to have an even better fourth quarter. Additionally, SNDL stock trades its book value and right around 60 cents per share.
This year, sundial Growers became a meme stock and consequently took advantage of that status to fortify its balance sheet. It now boasts $629.14 million CAD in cash equivalents as of September. Hence, it could be an incredible platform to push forward and continue investing in new targets.
Cresco Labs (CRLBF)
Marijuana wholesaler Cresco Labs is one of the best performing cannabis players in the U.S. With most of its revenues coming from its wholesale operations, it doesn’t need a massive retail network to expand or consistently generate healthy cash flows. However, it also has an incredible retail footprint that grows with every passing quarter. Moreover, it has its presence in the top U.S. pot states in California, Massachusetts and New York.
Furthermore, Cresco’s revenues have been growing at a solid clip. In its most recent quarter, its sales shot up more than 40% YOY. Additionally, its Q3 adjusted EBITDA improved 24% from Q2 2021.
So, with all of that in mind, Cresco remains on track towards profitability and expanding its footprint across the States — pushing CRLBF stock to new heights.
Marijuana Stocks To Buy: Green Thumb Industries (GTBIF)
Green Thumb Industries has positioned itself as a major player in the high-growth cannabis sector. The cannabis consumer packaged goods giant has its presence in 13 different states. Moreover, it has swiftly expanded its business in the past seven years and has done so with solid fundamentals across the board. Despite a stellar report card in the past few years, GTBIF stock only trades at six times trailing sales.
Green Thumb’s financials are rock-solid, which places it among the crème de la crème of the cannabis world. For instance, its five-year revenue growth has averaged a staggering 184%. Moreover, its YOY EBITDA growth has been at a remarkable 154%. Consequently, this year’s levered free cash flow growth has grown at a colossal 314%. With such numbers, the company’s stock is still valued cheaply, making it a no-brainer.
Trulieve Cannabis (TCNNF)
Trulieve Cannabis is among the most successful multi-state operators in the U.S. today. Though it started as purely a medical-use cannabis enterprise, it has quickly expanded into other profitable verticals — becoming a juggernaut in the business. Moreover, it is vertically integrated, which gives TCNNF stock a major edge over its competition and its underlying business in generating profits over the long term.
The company recently reported a profitable quarter for the 15th-straight time, generating $224.1 million in revenue for the period. The 64% increase in revenues during its third quarter resulted in a net income of $18.6 million.
Moreover, the company has also acquired one of its peers in Harvest Health and Recreation, likely to take combined revenues to a record high. With such an incredible performance of late and the recent acquisition of Harvest Health, Trulieve is poised to become the biggest cannabis operator in terms of revenue.
Marijuana Stocks To Buy: Curaleaf (CURLF)
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Curaleaf is a top growth stock in the cannabis world, generating nearly $890 million in the last nine months and operating in 23 states across the U.S. Moreover, the company’s five-year average sales growth is spectacular 262%. Its top line has been growing in line with a solid increase in profits.
In its third quarter, the company’s sales growth was up an incredible 74% from the prior-year period. Moreover, it generated $71.4 million in adjusted EBITDA, representing a 69% increase from last year’s same period. On top of that, its healthy gross margins at more than 45% point to even higher profits in the future. With its strong infrastructure and scale, Curaleaf is incredibly positioned to take advantage of positive legislation in the coming year.
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Canadian cannabis giant Tilray became the largest marijuana producer based on Pro-forma sales this year after merging with Aphria. Moreover, its low-cost operations have enabled the company to maintain strong profitability compared with many of its peers. However, it doesn’t plan to stop there, as Tilray has laid out its highly ambitious plan to achieve $4 billion in revenues by 2024.
Though its $4 billion plan seems like a long shot, such an aggressive strategy will invariably result in much activity in the coming years. Specifically, Tilray has massive opportunities to expand its revenues and profits. For instance, it has a strong presence in the German cannabis market, a region where it may grow to $4 billion within the next three years.
Additionally, the cannabis company announced this week that it will report its Q2 of fiscal year 2022 earnings on Jan. 10, 2022. Therefore, investors will get a chance to clearly see where things stand for Tilray.
Marijuana Stocks To Buy: GrowGeneration (GRWG)
GrowGeneration is a relatively new name in the cannabis business but offers a unique solution to disrupt the sector. It is currently one of the most recognizable names in hydroponics, supplying essential services to the marijuana sector. Moreover, it operates 62 stores across 13 different states.
In its latest quarter, sales shot up to $116 million, representing a 110% increase from the prior-year period. This led to more than $4 million in net income during the period. Additionally, according to research, the hydroponics market will likely grow at a healthy 11% through 2026. In turn, this bodes exceedingly well for GrowGeneration and its operations.
So, with all of that in mind, investors looking to maybe try out a fresh face in the industry should consider GrowGeneration as one of the top marijuana stocks to buy.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.
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