5 Cannabis Stocks to Watch

Despite slow progress, there’s hope that the Drug Enforcement Agency will reschedule cannabis next year. Here is a collection of stocks to watch based on recent cannabis earnings reports.

• Cronos Group has reported its highest quarterly net revenue on record.
• SNDL has achieved its first quarter of positive free cash flow.
• Canopy cut its debt by more than half in its most recent quarter.

Tilray

The Canadian Market Stock

Tilray [TLRY] narrowed its losses in the June–August quarter, from $65.8m in the same period a year ago, to $55.9m. Revenue was up 15.5%, to $176.9m from $153.2m, while the company grew its share of the Canadian cannabis market to 13.4%, thanks in part to its acquisition of HEXO [HEXO] in June and Truss Beverage in August. “The HEXO and Truss acquisitions have already boosted our competitive cannabis positioning in Canada,” said Tilray CEO Irwin Simon in a statement.

Cronos Group

The Record Revenue Stock

Cronos Group [CRON] reported its highest net revenue on record, for its quarter ending 31 August: $24.8m, a year-over-year growth rate of 22%. Its Canadian business enjoyed a 40% growth rate, thanks to strong sales in pre-rolls, flowers and edibles. “By most financial metrics, the third quarter (Q3) of 2023 was one of the best quarters in Cronos history,” declared Cronos President and CEO Mike Gorenstein in a press release. Nevertheless, Cronos shares are down 2% since 8 November, the day of the release, and down 22.8% year-to-date.

Canopy Growth

The Debt Reduction Stock

Canopy Growth’s [CGC] revenue may only have risen 6% in its Q2 2024, but the company slashed its debt by C$364m to C$681m in the quarter. The firm has reduced its debt by a total of $1bn since Q1 2023. “Canopy Growth has successfully transformed into an asset-light, cannabis-focused company with a stronger balance sheet,” said Canopy CEO David Klein in a statement issued with the results on 9 November. Last week, the company’s sale of its dietary supplements business BioSteel was approved by a court in Ontario.

SNDL

The Positive FCF Stock

SNDL [SNDL] has achieved its first quarter of positive free cash flow (FCF), generating C$16.5m versus a negative FCF of $67.1m reported in the year-ago quarter. CEO Zach George described it as a “pivotal milestone” in a statement released alongside the results on 13 November. The company also announced that its board of directors had approved the renewal of a share-buyback programme, which will see it repurchase up to C$100m of its own stock. The SNDL share price is down 7.5% over the last week, and down 29.2% year-to-date.

AFC Gamma

The CEO Successor Stock

AFC Gamma [AFCG] reported net income falling to $8m in the three months to 30 September, from $11.5m in the year-ago quarter. A real estate financing company focused on the cannabis industry, it saw interest income fall to $16.8m from $19.8m. It also announced it has tapped Daniel Neville, the CFO of Ascend Wellness Holdings [AAWH], to be its CEO. “I believe that as a lender, it has become increasingly important to have in-house operating expertise to contribute to the underwriting and portfolio management of cannabis credits,” said outgoing CEO Leonard Tannenbaum in a statement.

Another Way to Invest in Cannabis

The Global X Cannabis ETF

The Global X Cannabis ETF [POTX] holds all five stocks. As of 31 October, healthcare accounted for 44.8% of the portfolio, while consumer staples and real estate had weightings of 26.4% and 19% respectively. Communications services and financials had allocations of 5.4% and 4.5%. The fund is down 62.5% in the past year and down 35.1% in the past six months.

The Cambria Cannabis ETF [TOKE] also holds all five stocks. As of 30 September, consumer staples and healthcare had been allocated 48.7% and 32.3% respectively. Materials, real estate, financials, consumer discretionary, industrials and technology all had single-digit weightings. The fund is down 23.4% in the past year and down 6.3% in the past six months.