Cannabis stocks might be having a hard time now due to the lack of positive movement toward U.S. federal legalization. But states have understood the benefits of legalization. So as long as states continue to push toward…
legalizing marijuana at the medical and/or recreational level, cannabis companies will keep growing.
The industry is loaded with sizzling stocks that are performing staggeringly well amid a limited legal market. If there is more state legalization in 2022, this will create room for these companies to expand. Most cannabis stocks are available at a bargain rate now, but in my opinion, these three are the right ones to buy and hold for another decade.
1. Tilray Brands
The only Canadian pot stock worth considering now is Tilray Brands ( TLRY -1.11% ). Post-merger with Aphria, Tilray has been doing exceptionally well. Aphria was already a profitable company with vast exposure globally. The combined company’s quarterly results have been quite impressive since the completion of the merger in May 2021.
In its recent fiscal second-quarter 2022 (ended Nov. 30), its total revenue increased 20% year over year to $155 million. Despite an early mover advantage in the Canadian medical cannabis market, revenue increased by 27% generating just $7.9 million for three months ended and $16.3 million six months ended November 30, 2021. And its recreational segment brought in $49 million in revenue for the quarter, thanks to the high-margin derivatives products that Aphria launched last year.
The company has a good presence in the European markets. Its distribution revenue generated from its German subsidiary CC Pharma fell 7% year over year but still contributed to 44% of total revenue. The company made a net profit of $6 million from a net loss of $89 million in the year-ago quarter.
The company has realized $70 million in cost synergies by Jan. 10. Among all the other benefits of a merger, cost synergies are the reduction in costs made by using each company’s efficiencies to generate profits. These benefits include high-class production facilities, innovative products, growth strategies, the scale of operations, and more.
Management is confident that Tilray will easily cross its original target of $80 million ahead of schedule and could also generate an additional $20 million in fiscal 2023. The company is also excited to bring in higher revenues from the burgeoning U.S. market with strategic acquisitions. CEO Irwin Simon stated in the earnings call, “These significant, diversified revenue streams are key to delivering on our ultimate goal of industry leadership with $4 billion in revenue by the end of the fiscal year 2024.”
According to Bloomberg, Tilray has also adopted a new parent name, Tilray Brands Inc, to capitalize on its brand strength. The company wants to be recognized as a global consumer packaged goods company and not just a pot company. Furthermore, talking about competition in the Canadian space, Tilray’s management also stated, “We do not believe this is a sustainable environment. Only the strong will survive.” The company also plans to go aggressive with its growth and marketing strategy and new product portfolio.
2. Columbia Care
New York-based Columbia Care ( CCHWF -1.58% ) is a small company by market cap ($1.1 billion). But its strategy of targeting limited license cannabis markets is helping it flourish. Since the drug is illegal at the federal level, state regulators are restrictive on the number of licenses they issue and to whom. But the company operates 131 facilities, 99 of which are retail stores, in key cannabis markets such as Massachusetts, Ohio, Pennsylvania, Illinois, Maryland, and Virginia.
This strategy has helped it generate $396 million in revenue over its last four reported quarters. In its recent third quarter, Columbia Care saw its revenue surge by a whopping 144% year over year to $132 million, and its earnings before interest, taxes, depreciation, and amortization ( EBITDA ) by a remarkable 634% to $31 million.
The company will report its fourth-quarter results on March 15. But management believes the delay in setting up regulatory markets in states that recently legalized marijuana could affect the fourth-quarter results. 2021 revenue could land in the range of $470 million to $485 million, adjusted EBITDA in the range of $85 million to $95 million, and its adjusted gross profit margin could be about 46%.
3. Cresco Labs
The Illinois-based pot company Cresco Labs ( CRLBF -3.08% ) is also a smaller company by size, with a market cap of just $1.7 billion, but it’s still in much better shape. Cresco Labs does not have a vast market presence yet, but with just 45 stores nationwide, the company has a trailing-12-month revenue of $766 million.
In its third quarter, the company grew its top line by…
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