Cannabis stocks are buzzing with optimism on the back of widespread positive updates. Germany recently legalized pot for recreational use, while Canada is rethinking cannabis taxes. Moreover, Florida is eyeing legalization through a November ballot. These positive developments are pushing cannabis stocks to fresh highs, offering a healthy upside ahead.
Furthermore, we’re seeing cannabis’ legal status evolve, and public support in the U.S. is hitting record levels. With global sentiment shifting towards acceptance and the industry navigating regulatory challenges, investors will want to keep tabs on these three top cannabis stocks to buy.
Tilray Brands (TLRY)
Tilray Brands (NASDAQ:TLRY) is the top cannabis business in the world in terms of market share, with a consistent track record of double-digit sales growth over the past several years.
However, TLRY stock has been in the red in the past few years amidst the choppiness in the cannabis market. Consequently, it has looked to diversify its revenue sources, such as its foray into the burgeoning beverage alcohol market. Its strategic diversification has paid many dividends, especially in recent quarters, where beverage alcohol sales have comfortably outpaced growth in its core cannabis business. In its fiscal 2024 third-quarter (Q3) report, sales from its beverage alcohol segment were up an incredible 165%, while cannabis sales jumped just 33% year-over-year (YOY).
Furthermore, Tilray is set to benefit immensely as the market leader in Germany’s burgeoning medical cannabis market, particularly after the recent de-scheduling. The change makes it much simpler to prescribe cannabis, which sets a strong foundation for top-line expansion ahead for the company.
Innovative Industrial Properties (IIPR)
Innovative Industrial Properties (NYSE:IIPR) is a real estate investment trust (REIT) that effectively caters to the cannabis sector’s real estate needs. It essentially provides a lower-risk entry into the cannabis sector by focusing on real estate, which sidesteps the industry’s regulatory roadblocks. Additionally, its effective sale-leaseback model offers cannabis players stable income through long-term leases, securing consistent top-line growth.
Engaging in real estate transactions with the lucrative cannabis space has proven incredibly fruitful for IIPR. For instance, its 3-year average funds from operations (AFFO) growth stands at a remarkable 22%, beating the sector median by 432%. A snapshot of its top-and-bottom-line metrics is unlike any cannabis business, a testament to its robust business model and stellar execution. Also, it offers a dividend yield exceeding 7.44%, with six consecutive years of payout growth, with an eye-catching 39% 5-year growth in payut growth. Therefore, IIPR stock is arguably one of the best low-risk ways into the cannabis space, with a considerable upside ahead.
Trulieve Cannabis (TCNNF)
Trulieve Cannabis (OTCMKTS:TCNNF) is a leading multi-state cannabis operator that distinguishes itself from its peers for its robust profitability profile. To put things in perspective, its gross, EBITDA, and net income margins have averaged 80%,51%, and 8.50% over the past five years. A lot of its success is linked to its strategic regional hub model, boasting a strong presence in key states, including Florida, Pennsylvania, and Arizona.
Furthermore, its audacious tax strategy, involving restructuring debts and capitalizing on tax refunds, has helped fortify its balance sheet. This is shown by its superb free cash flow balance of $167 million, compared to a negative $7 million cash balance in 2017. Moreover, with an industry-leading gross margin of more than 50%, the company will very much reap the benefits in a federal-level legalization scenario.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.