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While the Canadian cannabis industry has faced several challenges leading to disappointing returns for investors, U.S.-based marijuana stocks are showing promise. These American companies are positioned for growth and profitability as the U.S. cannabis market evolves, potentially benefiting from federal legalization. Here, we explore two TSX cannabis stocks that are worth considering for investment.
Green Thumb Industries (CNSX: GTII):
Company Overview: Green Thumb Industries, founded in 2014, is a leading national cannabis consumer packaged goods company and retailer. It specializes in manufacturing and distributing a portfolio of branded cannabis products under various labels, including RHYTHM, Good Green, and Beboe. Additionally, Green Thumb owns and operates a network of retail cannabis stores branded as RISE. With 18 manufacturing facilities, 84 retail stores, and operations in 15 markets, Green Thumb is one of the largest licensed marijuana producers in the world.
Growth Potential: The recent wave of cannabis legalization in the U.S. allowed Green Thumb to increase its sales from $7 million in 2016 to over $1 billion in 2022. The estimated U.S. cannabis market opportunity is valued at a substantial $100 billion, providing ample room for further growth. The company forecasts a 12% annual growth rate in the cannabis market over the next decade, driven by consumer demand and increased distribution.
Financial Performance: In Q2 of 2023, Green Thumb reported a revenue of $252.4 million, with an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $75.8 million. Notably, this marked the 10th consecutive quarter of positive net income. With a forward price-to-earnings ratio of 20, GTII stock is reasonably valued and currently trades at a significant discount (175%) to consensus price target estimates.
Curaleaf (CNSX: CL):
Company Overview: Curaleaf is a New York-based cannabis company with operations in 18 U.S. states. It owns and operates 150 dispensaries and 21 cultivation sites, with a strong presence in highly populated states such as Arizona, New York, New Jersey, Florida, Illinois, and Massachusetts.
Growth Potential: In Q2 of 2023, Curaleaf reported revenue of $339 million and an adjusted EBITDA of $70 million, reflecting an impressive margin of 21%. A substantial portion (82%) of its sales comes from retail stores, and the company has access to an addressable population of 400 million. Additionally, Curaleaf is expanding into international markets, including the U.K. and Europe, while keeping an eye on potential recreational cannabis legalization in Germany. Analysts remain bullish on CURA stock, with expectations of over 100% growth in the next 12 months.
Conclusion:
While the Canadian cannabis market has struggled, U.S.-based marijuana stocks are in a more favorable position to deliver consistent profits. Green Thumb Industries and Curaleaf, in particular, have demonstrated strong financial performance and growth potential. Investors seeking exposure to the expanding cannabis market should consider these U.S.-based cannabis stocks.
