Cannabis stocks have gone through multiple phases of high volatility in the last five years. Traders might have benefited from this volatility, but the sector has disappointed long-term investors. However, it finally seems that cannabis stocks might be positioned for a sustained rally.
There are multiple reasons for this view. First, several cannabis companies have managed to stem the cash burn, and fundamentals look better. Further, there seems to be optimism on the regulatory front. Germany recently legalized the recreational use of cannabis. Other European countries are likely to follow suit.
Additionally, it’s estimated that even without legalization, the U.S. cannabis market will likely be worth $71 billion by 2030. I must add that medicinal cannabis has big opportunities globally in the coming decade.
Overall, there will be several multibagger names from the cannabis industry in the coming years. Let’s talk about three cannabis stocks that seem poised to surge higher.
Cronos Group (CRON)
Cronos Group (NASDAQ:CRON) has been in a consolidation zone for the last 12 months. I believe a breakout on the upside is imminent backed by strong fundamentals. Further, there are positive business developments in terms of global expansion.
The first point to note is that Cronos ended Q4 2023 with a cash buffer of $862 million. That’s more than the company’s current market valuation. Further, Cronos expects to close this financial year with a positive net change in cash. Therefore, financial flexibility is high for organic and possible acquisition-driven growth.
It’s worth mentioning that the long-term outlook for medicinal cannabis is positive. That’s one area where Cronos seems to be building its market position. The company has entered the medicinal cannabis market in Germany and Australia in the last two quarters. Therefore, with new markets, cost reduction efforts and a significant war chest, CRON stock looks attractive.
Tilray Brands (TLRY)
Tilray Brands (NASDAQ:TLRY) seems like an exciting opportunity among cannabis stocks. The company’s growth has been accelerating and sustained margin improvement seems to be on the cards. At current levels of $1.7, TLRY stock seems poised for a big breakout.
For Q2 2024, Tilray reported revenue growth of 34% on a year-on-year basis to $194 million. For the same period, cannabis net revenue increased by 31% and international cannabis revenue surged by 55%. Growth in international markets was driven by the medicinal cannabis business.
It’s also worth noting that with multiple acquisitions last year, Tilray is the fifth-largest craft beer brewing company in the U.S. This segment will likely witness steady growth in the coming years. From a financial perspective, Tilray expects positive adjusted free cash flow during the financial year. With operating leverage and cost-cutting, I expect cash flows to swell.
Curaleaf Holdings (CURLF)
Curaleaf Holdings (OTCMKTS:CURLF) is another potential multibagger among cannabis stocks. With a strong presence in the U.S. and an expanding European presence, Curaleaf seems positioned for accelerated growth and value creation.
For 2023, Curaleaf reported revenue of $1.35 billion, higher by 6% on a year-on-year basis. For the same period, adjusted EBITDA and operating cash flow were $304.5 million and $91.2 million respectively.
While last year’s revenue growth was muted, Curaleaf believes the coming year will set the stage for accelerated growth.
The global opportunities we’ve been building our business toward are unfolding rapidly, and 2024 will be the company’s catalyst year. Therefore, it’s a good time to consider exposure.
I like the fact that Curaleaf has a strong focus on research and development. In 2022, the company launched 171 new products. With the company’s focus on the medicinal cannabis business in Europe, I am bullish on new products driving long-term growth.
On the date of publication, Faisal Humayun did not hold (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.
