Neither Canopy Growth (CGC -3.58%) nor Tilray (TLRY) are feeling a whole lot of love from investors these days. Canopy Growth delivered what can only be described as ugly fiscal 2020 first-quarter results last week. One analyst called Tilray's latest quarterly results "an unmitigated disaster" and predicted that the stock will plunge.

Despite the negativity, there are several things to like about both Canopy Growth and Tilray. But which of these unloved cannabis stocks is the better pick for investors right now?  

Big cannabis leaf in a shopping cart.

Image source: Getty Images.

The case for Canopy Growth

Let's first air Canopy Growth's dirty laundry. The company bungled things pretty badly in Q1. Canopy appears to have shipped way too much of its cannabis oil and softgel products in what could be a classic example of channel stuffing. Founder and former CEO Bruce Linton was shown the door in July after the company posted Q4 results that weren't nearly as bad as its Q1 performance.

However, Canopy Growth didn't rise to become the largest cannabis producer in the world by market cap by accident. And you can bet that alcoholic beverage maker Constellation Brands (STZ -0.04%) did its homework before investing billions of dollars for a 38% stake in Canopy.

Even though the company has had its fair share of problems, Canopy Growth remains a leader in the important Canadian cannabis market. The company should enjoy a nice boost beginning later this year when the cannabis derivatives market opens for business. Canopy is set to launch a variety of products, including cannabis-infused beverages, edibles, and vapes.

The global medical cannabis market opportunity is bigger than the total Canadian cannabis market. Canopy Growth already has a solid presence in Europe and Latin America. The company's international medical cannabis sales already rank among the highest among Canadian cannabis producers.

Canopy  Growth is also poised to make its mark in the U.S. The company is building a large-scale hemp production facility in New York state and expects to roll out its first hemp CBD products by the end of the year. It has also laid the groundwork for entering the big U.S. marijuana market with its deal to acquire U.S.-based cannabis operator Acreage Holdings. The acquisition won't be finalized, however, until U.S. federal laws are changed to permit the legal use of marijuana.

One of Canopy's greatest advantages is its relationship with Constellation Brands. Canopy's cash stockpile remains very large -- around 3.1 billion in Canadian dollars at the end of June -- thanks to the big investment by Constellation. Constellation also has significant expertise in building successful consumer products, a plus that should help Canopy tremendously as it seeks to carve out a spot in the rapidly expanding U.S. CBD market. 

The case for Tilray

Since we started off with the negatives for Canopy Growth, let's look at Tilray's weaknesses first, too. The most glaring problem for the company is that it continues to hemorrhage cash. Tilray reported a net loss in its second quarter of $35.1 million. Unlike Canopy, though, Tilray doesn't have a big equity partner that gave it a nice nest egg from which to draw. Tilray also has much lower production capacity than several of its peers.  

The good news is that Tilray has taken steps to boost its capacity. CEO Brendan Kennedy stated in the company's Q2 conference call that Tilray has tripled its cultivation, manufacturing, and processing space over the last two quarters, with a primary focus on increased cannabis processing capabilities. The company has also added significant outdoor production at its Portugal facility.

Speaking of that Portugal facility, Tilray recently announced that it entered into an agreement to ship medical cannabis to Germany from Portugal. The deal with Cannamedical Pharma includes an initial shipment worth $3.3 million. Tilray expects that its Portugal facility will give it a strong launching pad to compete in medical cannabis markets throughout Europe.

Tilray could have an edge in these European markets with its Novartis partnership. The Swiss drugmaker's Sandoz unit first teamed up with Tilray to focus on the Canadian medical cannabis market but expanded the relationship to target the global market. Brendan Kennedy thinks that having the Novartis brand on its medical cannabis products "inspires confidence and trust" with physicians and pharmacists and "builds a halo" around Tilray's brands.

The company's other partnerships with major players outside of the cannabis industry also works to Tilray's advantage. Tilray and Authentic Brands Group (ABG) plans to launch cannabis-infused consumer products by the end of 2019. The company is also working with giant beer-maker Anheuser-Busch InBev to develop nonalcoholic cannabis-infused beverages in Canada.

Tilray has already jumped into the U.S. hemp market, thanks to its acquisition earlier this year of Manitoba Harvest. The hemp food-maker's products are currently sold in 16,000 retail locations, around 13,000 of which are in the U.S.  

Better buy

In my view, the choice between Canopy Growth and Tilray is an easy one. I think that Canopy Growth is the better pick right now in spite of its dismal performance this year.

The key differentiator is cash. Neither Canopy nor Tilray is profitable, and neither company is likely to generate consistent profits for another few years. Canopy's big cash stockpile should allow it to fund operations for a longer period than Tilray will be able to without taking on debt or issuing new shares.

I suspect that Constellation Brands will exert its influence to help Canopy Growth find a strong new CEO to lead the company forward. I also think that 2020 will be a much better year for Canopy than 2019 has been so far.

Canopy has plenty of issues to resolve, but I still expect that the company will be one of the top winners in the global cannabis industry over the long run.