FEATURED PARTNER OFFER
Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.
Cannabis is now legal in 37 states for medical use and fully legal in 23 states, but on a federal level, its status has barely changed since the 1970s. Cannabis currently shares the same federal classification as heroin, ecstasy and LSD.
Cannabis stocks jumped after the U.S. Department of Health and Human Services recommended easing restrictions on marijuana in August. However, cannabis also has seen slower-than-forecast progress on the legalization front. These two factors highlight the potential upside and the level of uncertainty that exists for marijuana companies.
North of the border, Canada legalized marijuana across the nation in 2018, which has allowed many publicly traded American cannabis companies to list their shares on Canadian exchanges.
For those brave enough to dive in after what has been a torrid time for marijuana shareholders, here are eight potential cannabis contenders. Just be wary that all these companies are scrappy growth stocks with small market caps, and by extension, they carry very real downside risk.
Read more
Show Summary
- The Best Cannabis Stocks of July 2024
- Curaleaf Holdings (CURLF)
- Green Thumb Industries (GTBIF)
- Verano Holdings (VRNOF)
- Trulieve Cannabis (TCNNF)
- Cresco Labs (CRLBF)
- Glass House Brands (GLASF)
- The Cannabist Company Holdings (CBSTF)
- WM Technology (MAPS)
- Methodology
- Risks of Buying Cannabis Stocks
- The State of the U.S. Cannabis Market in 2023
- Next Up in Investing
The Best Cannabis Stocks of July 2024
Company (ticker) | Market Capitalization |
---|---|
Curaleaf Holdings (CURLF)
|
$3.3 billion
|
Green Thumb Industries (GTBIF)
|
$2.6 billion
|
Trulieve Cannabis (TCNNF)
|
$1.8 billion
|
Verano Holdings (VRNOF)
|
$1.4 billion
|
Cresco Labs (CRLBF)
|
$622 million
|
Glass House Brands (GLASF)
|
$552 million
|
The Cannabist Company Holdings (CBSTF)
|
$112 million
|
WM Technology (MAPS)
|
$90 million
|
Methodology
The stocks chosen for this list include eight cannabis stocks that trade publicly on North American stock exchanges and meet the following requirements:
- Market cap over $75 million.
- Revenue above $50 million for 2022.
- Positive and growing revenue over the last three years.
- A price-to-sales ratio of below 2.50 at the time of compiling.
- Tangible exposure to or investment in the cannabis industry.
Cannabis companies represent highly risky growth stocks. Most do not make profits, and hence we have limited our search to companies showing positive and growing sales revenue over the last three years, which is often used as a backup for profit. The one exception to this rule is Verano Holdings, which does not have sales data going back that far.
While the companies are all small, we have used a $75 million market cap floor for this list. We have also excluded any companies that generated sales under $50 million last year. Several of the stocks are listed in both Canadian and U.S. markets. Keep in mind that most cannabis companies are scrappy growth stocks with small market caps that carry very real downside risk.
To learn more about our rating and review methodology and editorial process, check out our guide on how Forbes Advisor rates investing products.
Please note that the stocks above were selected by an experienced financial analyst, but they may not be right for your portfolio. Before you decide to purchase any of these stocks, do plenty of research to ensure they are aligned with your financial goals and risk tolerance.
Best Online Brokers 2024
Choosing the right online broker is one of the most challenging decisions you’ll make as an investor. We spent six months testing 21 of the leading online brokers to identify the best of the best.
Risks of Buying Cannabis Stocks
Owning cannabis stocks is associated with some unusual risks that investors need to clearly understand. These include legal and political risks, as well as other unconventional financial constraints.
- Legal risks. Possession and sale of marijuana is against federal law in the U.S., while only four states have maintained complete legal prohibition of cannabis. The 46 other states have enacted a patchwork of different legalization regimes governing marijuana.
- Financial constraints. Given federal prohibition, there are severe restrictions on banks that deal with cannabis-related businesses. This makes it difficult for some U.S. marijuana businesses to access key financial services.
- Supply and demand risks. Given the factors above, plus its status as a rapidly growing industry, cannabis is prone to irregularities in supply and demand. Canadian growers initially undertook major expansion initiatives to increase production capacity in order to meet recreational marijuana demand, then curtailed production because supply rapidly outstripped demand, causing prices to fall and corporate revenue to suffer.
- Profitability risks. Most of the cannabis companies listed above have not achieved profitability and carry large debt burdens, meaning they could face the prospect of running out of cash. Growth stocks of this sort often raise capital by issuing new shares, which dilutes the value of the existing shares.
- OTC risks. Many cannabis stocks trade in over-the-counter markets, which means they are not required to file regular financial statements or maintain minimum levels of market capitalizations. The financials of OTC stocks can be opaque, and they may have low liquidity making them difficult to trade.
The State of the U.S. Cannabis Market in 2023
The first wave of U.S.-listed cannabis stocks has been something of a disappointment. Shares of high-growth, multi-state operators (MSO) have slumped in the past couple of years as cannabis producers face pricing pressures in a fiercely competitive U.S. market.
The falling price of the marijuana flower has squeezed companies and pulled stock prices down in the process. Comparing Q3 numbers in 2022 to a year prior, the price of a gram of marijuana fell 13% from $10.83 to $9.43—the largest price decrease ever across a 12-month period.
While U.S. producers have benefited from ongoing state-by-state cannabis legalization, there has been little meaningful progress on national cannabis reform.
The federal government’s Marijuana Opportunity Reinvestment and Expungement Act (MORE) proposes decriminalizing the drug by removing it from the Controlled Substances Act. However, the bill has not been passed by the Senate to date.
Analysts see bigger opportunities for long-term cannabis investors in Canada. Almost five years after recreational cannabis was legalized nationwide in 2018, there is a thriving market for public cannabis companies there.
Many American companies—such as Curaleaf, Green Thumb Industries and Trulieve, among others—are listed on Canadian exchanges and trade as American Depository Receipts in the U.S. OTC market.
Looking For A Financial Advisor?
Get In Touch With A Pre-screened Financial Advisor In 3 Minutes
Find A Financial Advisor
Via Datalign Advisory