There's a lot of hype surrounding Aurora Cannabis (ACB 3.11%) these days after the company reported an improved quarter last month. However, there's still a long way to go before it becomes profitable, and I'm just not convinced it has yet proven that it's anything more than a speculative, high-risk investment. Below are three other cannabis stocks that are much better buys than Aurora.
1. Curaleaf
Curaleaf (CURLF +3.26%) is an easy pick because of how well the company's already grown and how likely it is to continue growing. In its first-quarter 2020 results, which the Massachusetts-based pot producer released May 18, Curaleaf reported quarter-over-quarter revenue growth of 28%.
It's a good growth rate, but the real reason Curaleaf looks to be an attractive buy is just how much more growth it may achieve in the coming quarters. The company only closed on its acquisition of Select on Feb. 3. Bringing the large West Coast distributor into the fold will give Curaleaf a tremendous presence on that coast -- a market Aurora can only dream of accessing today.
Image source: Getty Images.
Not only that, but Curaleaf's expanding into Oklahoma and Colorado as well. Curaleaf's growing its presence across the U.S., and the only thing that might stop it from having a great 2020 is the same thing that could stop every stock -- the coronavirus pandemic.
But there's no denying that Curaleaf's opportunities far exceed Aurora's. While Aurora's excited about getting into a crowded hemp market, Curaleaf has a strong foothold in the hottest pot market in the world -- the U.S.
2. GW Pharmaceuticals
GW Pharmaceuticals (GWPH +0.00%) is a better investment than Aurora today not only because it has some exciting growth opportunities, but because demand for its products will likely be less volatile. GW's focus is on the medical marijuana market, not recreational sales. And while investors may scoff given the more limited growth that segment of the market could to offer, it's a more recession-proof segment to invest in.
Like vitamins, prescriptions, and healthcare products, medical marijuana is a necessity for patients who rely on it. Recreational pot is a more discretionary expense and one for which demand can vary greatly, especially during a pandemic when job losses are mounting.
GW's also getting a lot closer to breakeven. In its first-quarter results released May 11, the U.K.-based company reported a net loss of $8 million -- down from more than $50 million the year before. While GW's top line tripled from its year-ago level, the company's operating expenses rose by a more modest 41%. The ability to control its costs in the midst of such rapid growth helped GW improve its bottom line.
In September, the European Commission approved GW's Epidiolex drug to treat people with Dravet syndrome and Lennox-Gastaut syndrome. The decision effectively gives GW more than two dozen countries in which it can sell its products. With even more growth on the horizon, GW could become a profitable stock a lot sooner than Aurora will.
3. Trulieve
Trulieve (TCNNF 4.90%) is what I'd consider to be an anti-Aurora stock in that its approach is completely the opposite of the Canadian producer's. Where Aurora focused on expanding into every market it could, Trulieve went for a more focused strategy. And it's a move that's paid off for the company. Florida-based Trulieve doesn't have much of a presence outside the Sunshine State, and that's OK.
On May 21, the pot producer opened its 50th location in the U.S. and its 48th in its home state. The company's made moves in the past few years to expand into California, Massachusetts, and Connecticut. However, a strong presence in Florida is what makes it one of the top cannabis stocks in the country.
Trulieve released its first-quarter results May 20, with sales up 21% from the fourth quarter. The company also reported a profit of $14 million, and it's been able to stay in the black in each of the past seven quarters. By comparison, Aurora's reported a profit in just two of its last seven earnings reports.
Like GW, Trulieve's growth comes from the medical marijuana segment of the cannabis industry, and that's why it's also a more attractive and less volatile investment than Aurora.
Which stock is the best buy of the three listed here?
It's no surprise that every stock on this list has soundly outperformed Aurora this year. Even the Horizons Marijuana Life Sciences ETF (HMLSF 1.91%) hasn't done nearly as badly.
If you want to invest in a pot stock, you're better off with any of the three stocks listed here than you are with Aurora. If you're after growth, then Curaleaf is the stock for you. But if you want a bit more stability and less risk, then either GW or Trulieve are the options you'll want to go with. For risk-averse investors, I'd give the edge to GW because of the greater opportunities it has in international markets and the diversification that can provide.
