Aurora Cannabis ( ACB -5.21% ) ranked by far as the best-performing marijuana stock in November. Shares of the Canadian cannabis producer skyrocketed nearly 160%. Even with this huge gain, though, Aurora stock is down more than 50% year to date.
It's a much different story for Curaleaf Holdings ( CURLF -0.65% ) and GrowGeneration ( GRWG -2.88% ). Curaleaf's shares have jumped more than 70% so far this year, while GrowGeneration stock has skyrocketed more than 770%. Aurora remains one of the most popular marijuana stocks on the market, but it's time to say goodbye to Aurora Cannabis and hello to these two hot pot stocks.
Why they're hot
Curaleaf and GrowGeneration have achieved tremendous success for similar reasons. The continued growth of the U.S. cannabis market has served as a big tailwind for both companies.
Multistate cannabis operators have enjoyed tremendous momentum in large states that have legalized marijuana in some form. Curaleaf, the biggest MSO, is certainly no exception. The company currently operates in 23 states, including the fast-growing recreational market in Illinois and Florida's booming medical cannabis market.
Acquisitions have partly fueled Curaleaf's growth. The biggest of these deals -- acquiring privately held multistate operator Grassroots in July 2020 -- made Curaleaf the largest cannabis company in the world based on revenue. It also made Curaleaf the most diversified vertically integrated cannabis operator in the U.S.
Meanwhile, GrowGeneration has emerged as one of the top pick-and-shovel cannabis stocks. The company ranks as the largest retail chain of specialty hydroponic and organic garden centers. GrowGeneration now has 36 stores that are go-to sources for U.S. cannabis producers.
As with Curaleaf, GrowGeneration's acquisitions have been key to its growth. Most recently, GrowGeneration completed the acquisition of The GrowBiz, the third-largest chain of hydroponic garden centers in the U.S.
Huge opportunities ahead
There were a couple of big cannabis stories during the U.S. elections last month that bode well for both Curaleaf and GrowGeneration. Four states voted to legalize recreational pot. Two states voted to legalize medical cannabis.
Curaleaf CEO Joseph Lusardi cited the upcoming launches of the recreational marijuana markets in Arizona and New Jersey as top growth drivers for his company. GrowGeneration CEO Darren Lampert also said that the Election Day results presented a growth opportunity.
The vote by New Jersey residents to legalize recreational marijuana in particular could have a ripple effect. It's more likely now that New York, Pennsylvania, and Connecticut could also legalize recreational pot in the not-too-distant future.
Neither Curaleaf nor GrowGeneration has to rely on new markets to continue generating strong growth. Curaleaf should have great prospects in the states where it currently operates, especially in Ohio, Illinois, Pennsylvania, and Florida. GrowGeneration can keep up its momentum simply by consolidating the highly fragmented hydroponic retail market.
Much better than Aurora
Are Curaleaf and GrowGeneration really better picks than Aurora Cannabis? Absolutely.
For one thing, both companies are in much stronger financial shape than Aurora. While Aurora's revenue increased by a minuscule amount in its latest quarter, Curaleaf and GrowGeneration delivered year-over-year revenue growth of 164% and 152%, respectively, in their most recent quarterly updates.
Aurora hopes to achieve positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in its next quarter. Curaleaf and GrowGeneration both already consistently generate positive adjusted EBITDA. GrowGeneration is profitable, while Curaleaf is close to turning a profit.
Perhaps most importantly, Curaleaf and GrowGeneration operate in the U.S. -- the biggest cannabis market in the world. At this point, Aurora can only dream of a day when it will be able to enter the lucrative U.S. market.
If you're looking for the most talked-about pot stock, buy Aurora. If you want the best chance to make money, Curaleaf and GrowGeneration are much better picks.