Now that the federal government is finally taking action on cannabis rescheduling — moving it to Schedule III and creating de facto medical cannabis legalization — many are wondering about the status of cannabis stocks as a whole. Cannabis stocks, as a whole, spiked upwards on the news but quickly reverted to pre-announcement norms. That’s because creating a medical mandate for cannabis may prove more disruptive to the status quo than expected (and not in a good way) — but the uncertainty created is proving too much for most investors to stake their cash on any specific cannabis stock today.
One industry expert, Jordan Tritt, founder and CEO of The Panther Group, told me via email that he expects “medical cannabis to be a part of the overall existing medical supply chain” and that “this will be advantageous to endemic players.” At the same time, recreational sellers could benefit long-term, too, since they “will ultimately function like liquor stores and dispense more concentrated, non-medical, dosed cannabis products.”
With that in mind, these three cannabis stocks to buy represent the best blend of entrenched medical cannabis operations while picking the “best in class” recreational retailers to capture that side of the overall market.
Jazz Pharmaceuticals (JAZZ)
Jazz Pharmaceuticals (NASDAQ:JAZZ) is a no-brainer for the medical side of the cannabis stocks spectrum. The company is firmly entrenched in the medical market as the only one approved by the FDA to manufacture and sell “plant-derived cannabinoid medicine.” The company’s two cannabis-centric medications are Epidiolex, a CBD treatment for seizures, and Sativex, used to treat varied multiple sclerosis symptoms. It’s interesting to note that the latter medication, a direct cannabis extract, is primarily a European market product and not yet approved for wide use in the United States — though that may change with rescheduling.
In the company’s last quarterly report, Epidiolex sales climbed 5%, representing 21% of Jazz’s overall $900 million revenue. Considering its Euro-centric sales, Sativex revenue clocked in understandably lower but still put $2.7 million into company coffers. Still, the two products comprise a small slice of Jazz’s overall sales, which is bullish for two reasons: one, there’s plenty of room for the sales streams to grow as the market matures and, two, unlike many cannabis manufacturers, Jazz has plenty of peripheral revenue generators to keep operations ongoing while legal wranglings take their due course.
Tilray Brands (TLRY)
On the consumer side of the spectrum, Tilray Brands (NASDAQ:TLRY) may prove the top cannabis stock contender when it comes to widespread recreational retail sales. Though just today’s seventh top cannabis stock by revenue, Tilray has something the others don’t: a robust craft beer portfolio that buffers cannabis sector instability while providing baked-in distribution and marketing networks ready to spring into action as legal developments proceed.
Today, Tilray is the fifth-largest craft beer brewer in the United States. It gained the top spot after acquiring several brands formerly owned by Anheuser-Busch (NYSE:BUD). It’s those baked-in Anheuser Busch networks that will come in handy for Tilray, as affirmed by company CEO Irwin Simon, who’s discussed the long-term potential of THC-infused beverages at length. Irwin also indicated that Tilray will react to rescheduling, saying that they’re “well-positioned and ready to participate in the medical cannabis market in the U.S.”
Trulieve Cannabis (TCNNF)
Though it has (in my mind) fewer long-term prospects centered around cannabis rescheduling or widespread legalization, Trulieve Cannabis (OTCMKTS:TCNNF) offers investors something in the short term: access to (possibly) the next state-legal cannabis market.
Trulieve is Florida’s largest cannabis dispensary (medical cannabis is already legal in the state), meaning it’s instantly positioned to win if the current Smart & Safe Florida initiative (Florida Amendment 3) passes in November. The amendment needs 60% of the vote to pass, and as of April polling indicated 47% approved of the initiative with 18% undecided. Rescheduling news may help shift a portion of undecided voters toward legalization’s favor, particularly if President Biden or presidential candidate Trump weigh in on the issue favorably while on the stump.
Though still unprofitable, Trulieve’s sales surged in the first-quarter report, with as much as 96% of total revenue from retail sales, something management attributes to “higher retail traffic and average basket size.”
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
