Top 9 Cannabis Stocks In 2023

Top 9 Cannabis Stocks In 2023

UPDATED Apr 16, 2024

Cannabis stock investors have been on a wild ride since 2018 when Canada first announced that recreational cannabis would be legalized. Attention has since turned to the US where cannabis has been legalized in a growing number of states, and where legalization at the federal level appears to be drawing closer.

The legal status of cannabis in the US has created a unique situation. Cannabis use for medical reasons is allowed in 37 states, while cannabis can be used recreationally in 21 states. However, cannabis use is still prohibited at the federal level.

This legal framework has created the absurd situation where US cannabis companies can be publicly listed in Canada, but not in the US, while Canadian cannabis companies are allowed to be listed on US exchanges. Most US based companies are listed on the OTC market, but until cannabis is legal at the federal level you won’t see them on the NYSE or Nasdaq.

Another consequence of the legal situation is that most institutional funds (retirement funds and insurance companies) are not allowed to invest in cannabis stocks. This could provide a catalyst if or when cannabis is legalized federally.

As of 2023, Canadian producers are suffering from oversupply and growth is slow. US sales have grown quickly, but some states are also battling oversupply. Nevertheless, more states are expected to legalize cannabis use, and eventually it is expected to be legalized at the federal level too - so there are reasons to expect further growth, though it might not be linear growth. We have therefore focussed on US producers for this list.

9 companies

Cresco Labs Inc., together with its subsidiaries, cultivates, manufactures, and sells retail and medical cannabis products in the United States.

Why CL?

Growing market share with noteworthy acquisitions.

  • Cresco Labs is a US multi-state operator, which is set to be the largest by revenue when it completes the acquisition of Columbia Care. Shareholders of Columbia Care will receive equity totalling to US$2B in value as a part of the acquisition.
  • The company has the second largest footprint in the industry and the largest footprint outside of Florida, Holding market leading positions in four key states: Illinois, Pennsylvania, Colorado and Virginia.
  • Following the amalgamation of the business with Columbia Care’s assets, Cresco Labs will have a presence in 12 states and a material market position in seven of the top ten markets by revenue in 2025, according to the BDSA.
  • Cresco has some competitive advantages over smaller entrants into the market by virtue of their meaningful footprint in New York, New Jersey, Virginia, Pennsylvania, Ohio and Maryland. While these markets are harder to enter into, they have comparatively more growth and upside potential compared to some of the more competitive states like California, Oregon and Florida.
  • The company recently announced further expansion within the Florida market, by opening a second dispensary in the Orlando area, bringing the company’s presence in the state to 21 stores.
  • To fully complete the Columbia Care acquisition, Cresco announced that it had signed definitive agreements that solidify plans to divest certain New York, Illinois and Massachusetts assets to Sean ‘Diddy’ Combs. The divestiture will net the company US$185M in consideration, consisting of an immediate payment of US$110M in cash, US$45M in seller notes and the remainder payable post-close on the achievement of market-based milestones.
  • Cresco owns a large portfolio of brands targeting a variety of market segments, providing revenue opportunities across use cases from gummies, to capsules, oils and buds.
  • The company has also managed to grow its market share organically and deliver a relatively high 52% gross margin. Cresco has a reasonably strong balance sheet.
  • The company recently announced further expansion within the Florida market, by opening a second dispensary in the Orlando area, bringing the company’s presence in the state to 21 stores.
  • Cresco Labs is listed on the Canadian Securities Exchange and on the US OTC market.

Rewards

  • Earnings are forecast to grow 97.19% per year

Risks

  • Shareholders have been diluted in the past year

  • Volatile share price over the past 3 months

View all Risks and Rewards

Trulieve Cannabis Corp., together with its subsidiaries, operates as a cannabis retailer.

Why TRUL?

Florida’s medicinal cannabis market leader

  • Truelieve is the largest operator in Florida, where 70% of its revenue comes from. At present only medical marijuana is legal in Florida - but efforts are under way to have recreational cannabis legalized which should provide a kick to the market size of Truelieve’s key strategic stronghold.
  • The company also operates in five other states, giving it a footprint for further expansion.
  • Truelieve finds strength in its vertical integration, operating throughout the value chain from cultivation to processing and distribution via 162 dispensaries.
  • Trulieve continued to show its commitment to expansion, opening 11 new dispensaries in Phoenix and Tucson in Arizona, Apopka, Auburndale, Coral Springs, Hollywood, and Kissimmee in Florida; and Belle, Hurricane, Milton, and Morgantown in West Virginia.
  • On the revenue front, sales increased 34% year-over-year and declined 6% sequentially to US$301M. Gross profit came in at US$168M with a gross margin of 56% in the third quarter of 2022, compared to gross profit of $184M and gross margin of 58% in the second quarter off the back of increased pricing pressures, lower net patient growth and the impact of Hurricane Ian on inventory.
  • One thing investors should be aware of is that Truelieve has previously been purchasing growth with financing. While a viable strategy in the past, the most recent US$71.5M cash injection comes at the cost of 7.53% interest over the course of the five year loan. Taking on expensive loans in periods of economic uncertainty certainly adds to the company’s risks.
  • Recently in 2021, the company acquired Harvest Health & Recreation for total consideration of close to US$1.4B, consisting mainly of issued equity.
  • During the quarter ended September 30, 2022, the company exited the Nevada market and recorded a loss on disposal of intangible assets of US$34.4M. The Nevada presence was acquired in the recent acquisition of Harvest Health & Recreation and the decision to depart the market was strategic in nature.
  • Trulieve is listed on the Canadian Securities Exchange and on the US OTC market.

Rewards

  • Trading at 52.7% below our estimate of its fair value

  • Earnings are forecast to grow 116.18% per year

Risks

  • Shareholders have been diluted in the past year

View all Risks and Rewards

Tilray Brands, Inc. engages in the research, cultivation, processing, and distribution of medical cannabis products in Canada, the United States, Europe, Australia, New Zealand, Latin America, and internationally.

Why TLRY?

Canada’s cannabis leader with an eye on other lifestyle products.

  • Tilray was a leading cannabis stock during the 2018 industry bubble, but has since lost more than 95% of its market value. In 2021 Tilray merged with Aphria to create the second largest cannabis distributor in Canada (behind Canopy Growth). It has since overtaken Canopy in terms of revenue.
  • Tilray has taken a strategic decision to diversify into the beverage industry in the US, and has acquired several brewing companies and a bourbon distillery. This may enable it to build distribution capacity without needing to invest in more cannabis businesses ahead of federal legalization.
  • Tilray managed to achieve US$29.2M of positive Operating Cash Flow and US$25.4M of free cash flow.
  • The company has also grown into and maintained a market leadership position in Canada with 8.3% cannabis market share.
  • Gross profit rose to US$40.1M, a 22% increase, year over year. Adjusted gross margin held at 29% compared to the third quarter a year ago. An indication of the success on both the adult-use cannabis and beverage side of the business.
  • Isolated cannabis gross profit increased 37% to $$18.6M from US$13.5M in the prior year quarter, while the gross margin percentage increased to 37% from 23%. The increase in gross margin was due in part to numerous cost-savings programs, but offset by the overhead from intentionally reducing production.
  • Even though it isn’t cannabis related, Tilray completed the acquisition of Montauk Brewing Company, the leader in craft beer production in Metro New York. Their conscious expansion of other facets of the business helps diversify their revenue streams while cannabis continues to face regulator scrutiny which impacts margins.
  • Beverage-alcohol sales increased 56% to US$21.4M, over the prior year quarter, including revenue from acquisitions.
  • Tilray is listed in Canada and on the Nasdaq.

Rewards

  • Trading at 51.2% below our estimate of its fair value

  • Earnings are forecast to grow 86.08% per year

Risks

  • Shareholders have been diluted in the past year

  • Volatile share price over the past 3 months

View all Risks and Rewards

Village Farms International, Inc., together with its subsidiaries, produces, markets, and sells greenhouse-grown tomatoes, bell peppers, and cucumbers in North America.

Why VFF?

Diversified revenue provides stability.

  • Village Farms is a smaller cannabis company with diversified revenue streams, operating in Canada, the US and Mexico.
  • The company grows and distributes produce (fruit and vegetables) as well as cannabis. With 50% of its revenue coming from produce, the company has more stable cash flows than pure cannabis producers.
  • The company’s strategy surrounds the idea of being recognised as an international leader in consumer products from plants. The business has continuous growth pathways to expand internationally where cannabis legalization causes new markets to emerge. However, they’re able to hedge against the risk that it doesn’t through their other plant-derived products.
  • On November 15, 2021, Village Farms entered into a share purchase agreement with Rose LifeSciences for the acquisition of a 70% interest in Rose for a total purchase price (the "Purchase Price") of US$34.71M, comprised of a cash purchase price of US$14.8M million and the balance in Village Farm shares. The acquisition has bolstered their cannabis distribution and cultivation assets in Canada.
  • The company also owns the U.S.CBD brand Balanced Health Botanicals on a 100% ownership basis.
  • Despite the addition of Rose LifeScience and Balanced Health’s full quarter results, consolidated sales for the business declined from US$72.44M to US$71.06M this quarter compared to the same quarter last year. The company attributes this to the strong US dollar providing headwinds for Canadian sales but also acknowledges an organic decline in fresh produce sales.
  • Gross profit margin dwindled noticeable from 25% for Q3 2021 to 12% for Q3 2022.
  • As a smaller company, Village Farms may become an acquisition target ahead of federal legalization.

Rewards

  • Trading at 5.8% below our estimate of its fair value

  • Revenue is forecast to grow 12.07% per year

Risks

  • Volatile share price over the past 3 months

  • Currently unprofitable and not forecast to become profitable over the next 3 years

View all Risks and Rewards

Curaleaf Holdings, Inc. operates a cannabis operator in the United States.

Why CURA?

A US cannabis giant with positive cash flows.

  • Curaleaf is one of the largest US multi-state operators and active in 21 states. Across these 21 states, the company employs nearly 6,000 workers to help operate 29 cultivation sites and 147 dispensaries.
  • Notably, Curaleaf is the largest vertically integrated cannabis company operating in Europe, a key market in the coming years as adult-use approval becomes more widespread. Curaleaf’s already established presence in Europe is an important growth contributor as they’ll be able to capitalize on the growth opportunities quickly due to having the necessary infrastructure and approvals to operate overseas.
  • In the year to September 2022 Curaleaf earned $1.3B in revenue with positive cash flows. This makes it the largest cannabis producer in the world by revenue.
  • The company recently announced strategic exits from the majority of production and cultivation operations in California, Colorado and Oregon. While these states previously contributed handily to the growth of Curaleaf, the company cites recent legislative decisions and lack of enforcement of the illicit market as motivators behind the decision. These markets contributed less than US$50M in revenue to Curaleaf last year and the exit from these markets is expected to have a positive impact on cash flow generation.
  • Curaleaf has recently acquired a controlling 55% stake in Four 20 Pharma, a producer and distributor in Germany. The acquisition opens a pathway to acquire full control of Four 20 Pharma’s business within two years of adult-use commencing in Germany which is set for 2024. This helps drive Curaleaf towards the goal of international expansion into major global markets.
  • The company reported revenues of US$340M for Q3 2022, illustrative of an increase of and 7% YoY. Adjusted EBITDA for the quarter came in at US$84M, an increase of 18% from the same period last year. Curaleaf also continued to show its strong cash generation abilities, bringing in US$60M of Operating Cash Flow for the quarter.
  • Curaleaf is listed on the Canadian Securities Exchange and on the US OTC market.

Rewards

  • Trading at 76.8% below our estimate of its fair value

  • Earnings are forecast to grow 60.05% per year

Risks

  • Shareholders have been diluted in the past year

View all Risks and Rewards

TerrAscend Corp. cultivates, processes, and sells medical and adult use cannabis in Canada and the United States.

Why TSND?

Quality over quantity leads to industry beating margins.

  • Terrascend is a smaller multi-state operator with a presence in 5 US states and Canada.
  • The company owns the award winning chain of Apothecarium dispensary retail locations, as well as well known brands Gage Cannabis, Ilera Healthcare, and Kind Tree.
  • The company is recognised for its high quality products which have allowed it to earn industry-leading margins.
  • Terrascend managed strong revenue growth in 2022 (unlike many of its peers) and generated positive cash flow.
  • Terrascend is listed on the Canadian Securities Exchange and on the US OTC market.

Rewards

  • Earnings are forecast to grow 117.64% per year

Risks

  • Shareholders have been diluted in the past year

View all Risks and Rewards

Innovative Industrial Properties, Inc. is a self-advised Maryland corporation focused on the acquisition, ownership and management of specialized properties leased to experienced, state-licensed operators for their regulated cannabis facilities.

Why IIPR?

The cannabis industry’s landlord with properties in 19 US states.

  • Innovative Industrial Properties owns and manages properties for licensed cannabis industry operators in 19 states.
  • IIPR has capitalized on the fact that cannabis companies struggle to obtain financing due to the legal status of cannabis in the US. It provides capital to these companies by buying their properties and then leasing them back to the operators.
  • The company is structured as a REIT (real estate investment trust) so 90% of income is returned to shareholders as a dividend.
  • As an ancillary provider to the industry, IIPR doesn’t face as many legal hurdles and is listed on the NYSE.
  • By being able to keep the industry at an arms length, IIPR provides an investment opportunity within growing, niche industry without the direct regulatory risk exposure that pure-play cannabis companies face.

Rewards

  • Trading at 55.8% below our estimate of its fair value

  • Earnings grew by 6.9% over the past year

Risks

No risks detected for IIPR from our risks checks.

View all Risks and Rewards

The Scotts Miracle-Gro Company, together with its subsidiaries, manufactures, markets, and sells products for lawn, garden care, and indoor and hydroponic gardening in the United States and internationally.

Why SMG?

The ultimate ‘picks and shovels’ play in the US cannabis industry.

  • Scotts Miracle-Gro is another ancillary provider to the cannabis industry and the major supplier of equipment and materials to cannabis producers.
  • Originally a manufacturer and distributor of lawn care and gardening products, the company spotted an opportunity in the fledgling cannabis industry in 2014.
  • SMG’s Hawthorne Gardening Company subsidiary houses its cannabis related products which includes horticulture, organics, hydroponics, and lighting supplies.
  • Approximately 80% of SMGs revenue still comes from the gardening supply business which provides much needed stability.
  • SMG already offers institutional investors an indirect entry into the cannabis market as it is listed on the NYSE.

Rewards

  • Earnings are forecast to grow 51.12% per year

Risks

  • Interest payments are not well covered by earnings

View all Risks and Rewards

GrowGeneration Corp., through its subsidiaries, owns and operates retail hydroponic and organic gardening stores in the United States.

Why GRWG?

Capitalizing on the home growers market.

  • Grow generation sells cannabis growing equipment and materials to the retail market and to small scale commercial cultivators Products include hydroponic systems, grow tents, lights and nutrients.
  • The company operates 60 stores in 15 states - so there is still a lot of growth potential ahead. It would benefit from federal legalization as more states would presumably legalize recreational cannabis use and cultivation.
  • GrowGeneration is listed on the Nasdaq.

Risks

  • Volatile share price over the past 3 months

  • Currently unprofitable and not forecast to become profitable over the next 3 years

View all Risks and Rewards

Simply Wall St analyst Richard Bowman and Simply Wall St have no position in any of the companies mentioned.

Simply Wall Street Pty Ltd (ACN 600 056 611), is a Corporate Authorised Representative (Authorised Representative Number: 467183) of Sanlam Private Wealth Pty Ltd (AFSL No. 337927). Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situation or needs. You should not rely on any advice and/or information contained in this website and before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice. Please read our Financial Services Guide before deciding whether to obtain financial services from us.