There finally seems to be light at the end of the tunnel for the cannabis industry. It’s difficult to talk about the regulatory perspective. However, if we look at cannabis companies, there are stories that seem to be moving in the right direction.
I am talking about growth as well as margin improvement. In my view, selected cannabis companies will witness positive cash flows and improvement in fundamentals in the next 12 to 24 months. The column focuses on these hot cannabis stocks that are likely to surge higher on the back of positive fundamental developments.
An important point to note is that even without legalization, the U.S. cannabis market will be worth $71 billion by 2030. Even Europe has a big medicinal and recreational cannabis market. Therefore, companies have ample headroom for growth and value creation.
Let’s discuss three hot cannabis stocks to buy for 2024 and for the long term.
Cronos (CRON)
Cronos Group (NASDAQ:CRON) is among the hottest cannabis stocks to buy for multibagger returns. In the last six months, CRON stock has remained sideways and I expect a breakout after the consolidation.
It’s worth noting that as of Q3 2023, Cronos reported a robust cash buffer of $840 million. This provides the company with ample headroom for organic and acquisition-driven growth. In terms of organic growth, Cronos is expanding into new markets.
The company has entered a partnership with a Germany-based Cansativa for the distribution of the Peace Naturals brand. Cansativa has a strong distribution network of 2,000 cannabis-focused pharmacies and more than 300,000 patients. With the expectation of the legalization of cannabis in Germany, Cronos is positioned to benefit.
Australia is another market that offers promising growth prospects. The country reported a 120% year-over-year increase in medical cannabis patient approvals. The partnership with Vitura can help Cronos make inroads in a promising market. With diversification into new markets and with the guidance of positive net change in cash, CRON stock looks attractive.
Tilray Brands (TLRY)
Tilray Brands (NASDAQ:TLRY) stock has witnessed a healthy rally of 40% in the last six months. I believe this is on the back of diversification and healthy growth in the cannabis business.
Last year, Tilray Brands focused on acquisitions and has positioned itself among the leading craft beer brewers in the United States. It’s expected that the craft beer market will grow at a CAGR of 10.5% through 2032 to reach a global market size of $282 billion. Tilray is positioned to benefit from this growth.
At the same time, the company’s cannabis business seems to be gaining traction. For Q1 2024, Tilray reported international cannabis revenue growth of 37% on a year-on-year basis. This was driven by the medicinal cannabis segment. Even the Canadian cannabis revenue increased by 16.5%. It’s worth noting that Tilray has also guided for positive adjusted free cash flow for fiscal year 2024. With all these positives, I expect TLRY stock to remain in an uptrend.
Curaleaf Holdings (CURLF)
Curaleaf Holdings (OTCMKTS:CURLF) is another hot cannabis stock that has been a strong performer in the last six months. During this period, CURLF stock has trended higher by 28%.
In my view, Curaleaf is positioned for revenue growth acceleration in 2024 and that’s a key reason to be bullish. My view is underscored by the management comment that Curaleaf is looking “for a strong end to 2023 and an exciting 2024.” Investors will discover if the company finished strong when it releases Q4 earnings.
The company’s entry into Europe gives investors a good reason to expect accelerated growth. In Q3 2023, international revenue increased by 120% year-over-year to reach $16 million. With the company focusing on promising medicinal cannabis markets like the UK, Germany, Switzerland, and Poland, among others, the growth outlook remains bright. At the same time, Curaleaf has a presence in 17 states in the U.S. Therefore, the addressable market is already significant.
Focus on research and development is another reason to like Curaleaf. In 2022, the company launched 171 new products. The continued pipeline of products will support revenue growth acceleration.
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.
