Canadian cannabis companies have burnt massive investor wealth in the last five years due to a variety of sector-wide issues plaguing the sector. These structural headwinds include rising competition, lower profit margins, cannibalization of sales from the illegal market, high inventory levels, oversupply of cannabis, and overvalued acquisitions.
Alternatively, marijuana stocks south of the border are much better investments, as they are close to delivering consistent profits and may benefit from an entrenched position if cannabis is legalized at the federal level in the United States. Here are two such U.S.-based marijuana stocks you can buy right now.
Is Green Thumb Industries stock a good buy?
Established in 2014, Green Thumb Industries (CNSX:GTII) is a national cannabis consumer packaged goods company and retailer. It manufactures and distributes a portfolio of branded cannabis products such as RHYTHM, Good Green, and Beboe. Green Thumb owns and operates a network of retail cannabis stores called RISE. With 18 manufacturing facilities, 84 retail stores, and operations in 15 markets, Green Thumb is among the largest licensed marijuana producers in the world.
The recent wave of legalization in the U.S. allowed Green Thumb to increase sales from US$7 million in 2016 to over US$1 billion in 2022. The estimated U.S. cannabis market opportunity rivals alcohol or tobacco and is valued at US$100 billion, according to Green Thumb Industries, providing it with enough room to grow the top line further.
The company also forecasts the cannabis market to grow by 12% annually in the upcoming decade, fueled by consumer demand and increased access to distribution channels.
Despite a challenging macro environment, Green Thumb reported revenue of US$252.4 million in Q2 of 2023 with an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of US$75.8 million. Its net income stood at US$13.4 million or US$0.05 per share, which was its 10th consecutive quarter of positive net income.
Priced at 20 times forward earnings, GTII stock is reasonably valued and trades at a discount of 175% to consensus price target estimates.
What is the price target for Curaleaf stock?
Another cannabis giant, Curaleaf (CNSX:CL) is a New York-based company with a presence in 18 U.S. states. It owns and operates 150 dispensaries and 21 cultivation sites with operations in highly populated states such as Arizona, New York, New Jersey, Florida, Illinois, and Massachusetts.
In Q2 of 2023, Curaleaf reported revenue of US$339 million and adjusted EBITDA of US$70 million, indicating a margin of 21%. Around 82% of its sales are from retail stores and the rest from wholesale, as the company has access to an addressable population of 400 million.
With a market-leading position in the U.S., Curaleaf is now targeting expansion in international markets such as the U.K. and Europe. In Q2, its international sales almost doubled to US$14 million.
Curaleaf emphasized its market share in the medical marijuana market in the U.K. continues to grow as it ended Q2 with a direct patient share of 40%. It was also the first medical marijuana company to advertise on U.K. TV in 2023.
Moreover, countries such as Germany are on the cusp of legalizing cannabis for recreational use, unlocking another multi-billion-dollar market for Curaleaf. The company has started trading in the medical cannabis market in Switzerland and began sales in Poland.
Analysts remain bullish on CURA stock and expect shares to surge over 100% in the next 12 months.
