Only three Canadian marijuana stocks trade on the major U.S. stock exchanges. One of them claims the largest market cap of any marijuana stock -- Canopy Growth Corporation (NYSE:CGC). Another is the newest marijuana stock  -- Tilray, Inc. (NASDAQ:TLRY).

Canopy Growth got off to a great start in 2018, ranking as one of the best-performing marijuana stocks of the first half of the year before fading somewhat recently. Tilray enjoyed a fantastic initial public offering, although the stock has given up some of its early gains. But which of these two stocks is the better pick for investors now? 

Marijuana plants on increasingly higher stacks of coins

Image source: Getty Images.

The case for Canopy Growth

I think the arguments for buying Canopy Growth stock should be separated into short term and long term. The time periods for these two categories vary depending on the individual, but let's define short term as over the next three years or so and long term as four or more years in the future.

Over the short term, Canopy Growth's revenue and earnings are likely to explode. That's an easy prediction to make since the company so far has made its money primarily from the relatively small Canadian medical cannabis market. However, beginning on Oct. 17, Canada will allow adults to legally use marijuana for recreational purposes. This new market presents a tremendous opportunity for Canopy.

There are several reasons to think that Canopy will be a big winner in Canada's recreational marijuana market. It has the production capacity to meet a high level of demand. The company has already lined up retail cannabis supply agreements with six provinces and one territory -- more than any other marijuana grower. Its Tweed brand is one of the most recognized marijuana brands in the country.

Within the next two or three years, though, supply will catch up with and exceed demand in Canada. That's where the long-term case for Canopy Growth comes into play. And there are two key components to the company's long-term growth.

One is the global marijuana market. Canopy Growth boasts one of the strongest international growth strategies among its peers. The company is already generating revenue in the expanding German medical cannabis market. It has operations in Australia and recently announced acquisitions in Lesotho and Colombia that strengthen its presence in Africa and South America. 

Another is the cannabis edibles market. It will be next year before cannabis edibles and concentrates are legal in Canada, but Canopy Growth is already gearing up for the opportunity. The company and its partner, Constellation Brands, plan to launch cannabis-infused beverages, including zero-calorie drinks with mixtures of cannabinoids. If the U.S. relaxes federal laws prohibiting the sale of marijuana, Canopy Growth will have a lot more room to run with these new products. 

The case for Tilray

Let's stay with the short-term versus long-term prospects with our look at Tilray. Like Canopy Growth, Tilray should be in great shape to profit from the legalization of recreational marijuana in Canada. The company has retail cannabis supply agreements with five provinces and territories so far.

Capacity shouldn't a problem. Tilray is rapidly expanding its facilities. By the first half of 2019, the company expects to have around 912,000 square feet of growing space, 230,000 square feet of which is in its Portugal location.

Tilray's long-term prospects go beyond Canada. The company already has very active global operations. Tilray was the first Canadian marijuana grower to ship medical cannabis to Europe. Its Portugal facility gives it a great hub for serving the European market, especially the lucrative German market. The company also has exported medical cannabis to Australia, Chile, Cyprus, New Zealand, and other countries. 

Does Tilray have aspirations in the cannabis edibles market like Canopy Growth does? Yep. The company expects to produce a wide range of products at its High Park processing facility in Ontario, including edibles, beverages, capsules, vaporizer oils, and other products once they're legal in Canada.

So far, though, Tilray doesn't have a partnership with a major beverage maker. However, Molson Coors Brewing is reportedly looking to make a deal with a Canadian marijuana grower to develop cannabis-infused beverages. Tilray hasn't been specifically mentioned as a prospect in discussions with Molson Coors, but there could be other big companies interested in a partnership down the road.

Tilray is also active in another arena that could pay off over the long run -- the development of cannabinoid drugs. The company is evaluating cannabinoid products in clinical trials targeting several indications, including chemotherapy-induced nausea and vomiting (CINV) and glioblastoma. 

Better buy

Which of these two marijuana stocks is the better choice for investors? Tilray has one key advantage in that it's market cap of $2.3 billion is less than half that of Canopy Growth's $5.5 billion market cap. However, I think that Canopy Growth is the better pick over the long term.

Canopy's scale gives it an edge, as does its close relationship with Constellation Brands. Both companies, though, could face some challenges within a few years after supply exceeds demand in Canada. If global markets don't grow as fast as hoped, Canopy Growth and Tilray stocks could suffer. Investing in either of these marijuana stocks isn't for the faint of heart.