2 Top Cannabis Stocks to Buy on the TSX Today

Two cannabis stocks are the top picks as the market moves toward consolidation and stability.

| More on:
A cannabis plant grows.

Source: Getty Images

Cannabis legalization in October 2018 was supposed to bring success to a booming industry and deliver immense returns to investors. Unfortunately, it turned out to be a pot bust. Cannabis producers incurred huge losses and continue to struggle with financial viability five years later.

Top investment opportunities

The cannabis industry’s contribution to Canada’s economy isn’t entirely zero. Based on the joint report by the Ontario Cannabis Store and Deloitte, its contribution to GDP between 2018 and 2021 was $43.5 billion, along with 151,000 jobs nationwide. Some industry experts think a turnaround is possible with improved regulations and federal legalization in the US.

Today, cannabis stocks remain high-risk investments. However, an industry consolidation could lead to a rational cannabis market.  Frederico Gomes, director of institutional research in life sciences at ATB Capital Markets, said competition is stabilizing a market that may be close to consolidating.  

Gomes sees cannabis companies operating like firms in the consumer-packaged goods (CPG) industry or similar to tobacco and beer companies. Tilray Brands (TSX:TLRY) and Cronos Group (TSX:CRON) should be the top investment opportunities in such a scenario.

Market leader

Tilray has assumed market leadership with its 13.4% market share. The $1.7 billion company ranks no. 1 in sales for THC beverages, cannabis flower, oils, and concentrates; no. 2 in pre-rolls; and no. 4 in vape. Management said the most recent quarterly results confirm its market-leading position.

In Q1 fiscal 2024, net revenue increased 15% to US$177 million versus Q1 fiscal 2023, while net loss narrowed 15% year over year to US$55.9 million. Its Chairman and CEO, Irwin D. Simon, boasts that Tilray Brands’ is the most diversified global cannabis-lifestyle and CPG company and medical cannabis market leader in Europe.

Four distinct and complementary business segments bring balance to Tilray’s diversified business model. Besides medical and adult-use cannabis, it sells craft beer, spirits, ready-to-drink mixed cocktails in a can, non-alcoholic drinks, THC and CBD beverages, and wellness products. Tilray also engages in medical distribution.

Simon adds that Tilray is able and ready to capture several opportunities across multiple industries. Organic and acquisitive revenue growth should drive value and improve operating efficiencies, margins, and profitability.

The plan is to continue investing in the future and become a multi-billion-dollar company with a portfolio of best-in-class brands. Tilray trades at $2.31 per share (-37.06% year to date).

Best quarterly results

Cronos is another cannabis company reporting healthier Q3 2023 performance. The positive results should boost the cannabis producer. At $2.71 per share, the year-to-date loss is 21.22%. In the three months that ended Sept. 30, 2023, consolidated net revenue rose 22% to US$24.8 million versus Q3 2022. Notably, net loss improved 95% year-over-year to US$1.6 million.

Its Chairman, President, and CEO, Mike Gorenstein, said it was one of the best quarters in Cronos history. The $1 billion global cannabinoid company has a broader portfolio of unique and differentiated products. Gorenstein adds that Cronos is moving beyond its existing markets and opening new avenues for growth.

Redemption

Industry players failed in their promises to deliver superior returns after cannabis legalization. Still, Tilray or Cronos could redeem the sector and make investors rich soon.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends Tilray Brands. The Motley Fool has a disclosure policy.

More on Cannabis Stocks

Worker tags plants at an industrial cannabis operation
Cannabis Stocks

Can Canopy Growth Stock Finally Recover in 2024?

Down 98% from all-time highs, Canopy Growth remains a high-risk investment in 2024 given its weak fundamentals.

Read more »

A close up image of Canadian $20 Dollar bills
Tech Stocks

3 No-Brainer Stocks to Buy With $20 Right Now

These three stocks are easy buys for those who don't have all that much to spend, and want long-term growth…

Read more »

Pot stocks are a riskier investment
Cannabis Stocks

Slow Burn: Is Aurora Cannabis Finally a Good Buy in June?

One of the benefits of choosing from some of the most beaten-down market segments like cannabis is that even a…

Read more »

Caution, careful
Cannabis Stocks

I Wouldn’t Touch This TSX Stock With a 60-Foot Pole

I wouldn't touch Canopy Growth Corp (TSX:WEED) stock with a 60-foot pole.

Read more »

edit Cannabis leaves of a plant on a dark background
Cannabis Stocks

Why This Little-Known Cannabis Stock Could Double in 2024

This cannabis stock has already doubled this year since 52-week lows and could easily rise that much once more.

Read more »

Bad apple with good apples
Cannabis Stocks

1 TSX Stock I Wouldn’t Touch With a 420-Foot Pole

Down 87% from all-time highs, Cronos Group stock is a still a high-risk investment for long-term shareholders in 2024.

Read more »

A cannabis plant grows.
Cannabis Stocks

Canopy Growth: Buy, Sell, or Hold?

Canopy Growth (TSX:WEED) stock should make a killing on U.S. expansion, but investors will need to be very patient.

Read more »

Marijuana plant and cannabis oil bottles isolated
Energy Stocks

3 Canadian Value Stocks to Buy Right Now

Undervalued Canadian stocks such as Secure Energy should be part of your shopping list in May 2024.

Read more »