Skip to main content

TSX Utilities Capped Index(TTUT)

Today's Change
Real-Time Last Update

3 Cannabis Stocks With More Upside Potential Than Canopy Growth

Barchart - Thu Apr 4, 1:49PM CDT

The world of cannabis stocks is really heating up lately, thanks to some big moves on the regulatory front. Over in Germany, they've just decided to say "yes" to legalizing weed for personal use — up to 25 grams — and they're even cool with folks setting up “cannabis clubs.” The legislation, though scaled back from its original ambitions, is a pretty big win for cannabis operators in Europe's largest economy.

Meanwhile, here in the U.S., Vice President Kamala Harris expressed support for rescheduling cannabis during a roundtable broadcast, stating that "no one should be in jail because of marijuana." This kind of high-level support is getting people excited about what could happen next in the industry, especially with predictions that global sales could hit a whopping $57 billion by 2026.

One company that has captured significant attention is Canopy Growth Corporation (CGC), which saw its stock soar an impressive 100% in the week following Harris's remarks. The company has an upcoming shareholder vote where investors will weigh in on a new share class CGC is creating to tap into the U.S. market.

However, despite this impressive rally, Canopy Growth is currently “Moderate Sell”-rated by the 10 analysts in coverage, and trades at a steep 143% premium to Wall Street's mean price target.

For investors seeking exposure to this booming industry, there are some alternative cannabis stocks that offer more attractive upside potential. Three companies that have caught the eye of analysts are GrowGeneration (GRWG), Curaleaf Holdings (CURLF), and Green Thumb Industries (GTBIF), all of which are currently “Buy”-rated with upside potential of about 15% or more to their mean price targets.

So, if you're looking to invest in cannabis without getting swept up in the CGC frenzy, these three might just be your ticket.

Cannabis Stock #1: GrowGeneration (GRWG)

GrowGeneration Corp (GRWG) is making waves in the cannabis world, but not in the way you might think. They're the go-to guys for anyone looking to grow their own, offering everything from specialized lighting to nutrients. Basically, if you're aiming to boost your cannabis crop, these are the folks you call. Their gear caters to both the big-time commercial growers and the hobbyists doing it for fun.

Looking at how their stock's been doing, GRWG has picked up some steam in 2024 along with the rest of its industry peers. So far this year, the shares have added 17.4%, outpacing the broader market.

Since CEO Darren Lampert bought shares in the company last November, meanwhile, the stock has added 52%. Lampert now owns a stake worth 2.48%.

Plus, the company's kicking off its first-ever share buyback program, planning to scoop up to $6 million of its own stock - further suggesting that management is confident about their financial health and future trajectory.

But it's not all smooth sailing. Their latest earnings report was a bit of a letdown, with the loss per share missing the mark set by analysts. This isn't a new trend for them, unfortunately - although GRWG did beat top-line estimates.

Looking ahead, analysts are anticipating narrower losses starting in the June quarter, with fiscal 2024 losses expected at $0.32 per share, compared to $0.50 per share in 2023. By the end of 2025, they're expecting GRWG to shrink their losses to $0.22 per share.

Analysts are cautiously optimistic overall, giving GrowGeneration a “Moderate Buy” rating. The breakdown? Three are all in with a “Strong Buy,” and three are on the fence with a “Hold.” They've pegged the stock's mean target price at $3.82, which would be a 26% jump from its current price.

Cannabis Stock #2: Curaleaf Holdings (CURLF)

Curaleaf Holdings, Inc. (CURLF) is a big player in the U.S. cannabis scene, handling everything from growing the plant to selling it via dispensaries across several states. They offer a mix of medical and recreational products that are hitting the mark with consumers. 

Over the past year, CURLF stock has been in breakout mode. The shares have gained 122.4% in the past 52 weeks, and CURLF is 39.7% higher on a YTD basis.

With a market cap around $2.62 billion, Curaleaf is no small fry in the cannabis market - and they've been making some strategic moves to boost their position globally. They snagged Northern Green Canada (NGC), aiming to strengthen their supply in Europe with NGC's EU-GMP certification. Plus, they're making waves in Poland's medical cannabis market by acquiring Can4Med, which should help them reach more patients with high-quality products.

Financially, Curaleaf pulled in $345 million in revenue in the last quarter of 2023, marking a 4% increase from the previous quarter. That beat expectations, as did the adjusted net loss of $0.01 per share. Adjusted EBITDA was $83 million, or 24% of revenue, showing some solid improvement. For the whole of 2023, revenue hit $1.35 billion, up 6% from 2022. But despite these impressive numbers, they're still operating at a loss. Looking ahead, Wall Street is forecasting a per-share loss of $0.19 for the full fiscal year, slightly wider than $0.17 a year ago. 

Analysts remain upbeat about CURLF, which has a consensus “Moderate Buy” rating based on 11 analysts' recommendations. With 7 suggesting a “Strong Buy,” 1 opting for a “Moderate Buy,” and 3 playing it safe with a “Hold,” the mean target price of $6.36 points to expectations for 14.8% upside from the current price.

Cannabis Stock #3: Green Thumb Industries (GTBIF)

Green Thumb Industries Inc. (GTBIF) is really shaking things up in the cannabis world. They're not just growing plants; they're creating a whole range of products like edibles and topicals, and they're doing it with a focus on quality that's earning them fans from coast to coast. 

When you look at GTBIF's stock, you can tell they're doing something right. GTBIF is up a whopping 108% year-over-year, including a 29.5% return so far in 2024. Investors are clearly digging what Green Thumb is planting.

Green Thumb just opened their 15th store in Florida, which is part of their plan to spread those RISE dispensary vibes far and wide. This new spot's got all the THC and CBD products you could want, and it's all about giving patients top-notch care and access.

In its most recent earnings report, GTBIF fell short of EPS estimates - though it booked a small profit of $0.01 per share, and revenue of $9.86 million topped estimates. Analysts are eyeing serious EPS growth for GTBIF, with the full-year forecast calling for $0.25 - an increase of 66% year-over-year.

On balance, the Wall Street experts seem pretty jazzed about Green Thumb's prospects, slapping it with a “Strong Buy” consensus rating with 12 analysts in coverage. Specifically, 10 suggest a “Strong Buy,” and 2 suggest a “Moderate Buy.” They've set a target price of $17.48 for the stock, indicating expected upside of more than 21% from here.

Beyond Canopy Growth: Investing in Future Cannabis Giants

With the breakout price action in Canopy Growth stealing the show, it's easy to overlook up-and-comers like GrowGeneration, Curaleaf Holdings, and Green Thumb Industries. But these under-the-radar cannabis stocks have managed to earn Wall Street's seal of approval as they navigate a challenging industry that's just starting to open up. For seasoned investors or those just dipping their toes in, keep an eye on these rising stars for some promising opportunities ahead.

On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

More from The Globe

When will the Bank of Canada embrace reality?
James Thorne