Please ensure Javascript is enabled for purposes of website accessibility

3 Marijuana Stocks With Upside of 35% to 92%, According to Wall Street

By Sean Williams - Jan 29, 2021 at 6:36AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

These cannabis stocks may take their shareholders to greener pastures.

Few industries have begun 2021 on a higher note than cannabis.

The election of Joe Biden in November and the Democratic Party's sweep of the Senate runoffs in Georgia on Jan. 5 have people questioning if we'll soon see changes to the federal scheduling of marijuana.

However, there's a wide array of Wall Street opinions on the outlook for marijuana stocks. Most pot stocks have been flying in the new year, but many are near or well above Wall Street's one-year consensus price targets. According to analysts on Wall Street, the following three cannabis stocks offer the highest upside, ranging from 35% to 92%.

A cannabis leaf laid atop a one hundred dollar bill, with Ben Franklin's eyes peering between the leaves.

Image source: Getty Images.

Valens: Implied upside of 92%

There's only one pot stock that even comes close to having the potential to double over the next year, according to Wall Street professionals: Canadian processing company Valens (VLNCF 11.11%).

Pull up a three-year chart of Valens and you'll see that the stock is relatively unchanged. That's because Canada's many miscues have led to cannabis product oversupply throughout much of the country. With provinces like Ontario still working to open new retail locations, and Quebec not allowing cannabis vape products to be sold, the demand for higher-margin derivatives just hasn't necessitated as much processing capacity as initially anticipated.

However, it's not all bad news. Valens recently announced that it would take a one-time charge in the fourth quarter on its pricier oil products to better align its portfolio with the value-based derivative products Canadians are buying. This will lower costs moving forward and improve the company's operating margin.

Furthermore, Valens has been expanding its sales potential. It's emphasizing its white label manufacturing capabilities, and has plans to move into the health and wellness category in 2021. It's possible that Valens could get back into the profit column as soon as this year. 

A large cannabis dispensary sign in front of a retail store.

Image source: Getty Images.

Columbia Care: Implied upside of 38%

Most U.S. multistate operators (MSO) are within a stone's throw of Wall Street's one-year price target, but the oft-overlooked Columbia Care (CCHWF 4.12%) offers the highest implied upside in this category. Even after the company doubled in value from early October, analysts still see an additional 38% upside.

I know what you're probably thinking, and no, Columbia Care and the rest of the MSOs don't need federal cannabis reform to succeed. The federal government's current hands-off policy of letting individual states regulate cannabis is more than enough for Columbia Care, which has dispensaries and processing facilities in 18 states. 

Columbia Care had a pretty sizable medical marijuana presence in key U.S. states before they legalized adult-use marijuana. That existing presence has made it a bit easier for the company to pivot to adult-use cannabis in key markets like California, Arizona, New Jersey, and Colorado (Arizona and New Jersey voted to legalize recreational pot in November 2020).

Speaking of Colorado, Columbia Care is a big fan of inorganic growth opportunities. In September, it closed on its acquisition of The Green Solution, which is Colorado's leading integrated cannabis company. Given Columbia Care's presence in numerous potential billion-dollar markets, Wall Street's implied price target is certainly attainable. 

A vape pen next to a small vial of liquid and neatly arranged dried cannabis flower.

Image source: Getty Images.

KushCo Holdings: Implied upside of 35%

Analysts are also pretty high on ancillary small-cap cannabis company KushCo Holdings (KSHB), which continues to rebound after an absolutely abysmal 2020.

The coronavirus pandemic repeatedly clobbered KushCo, which provides everything from custom packaging for pot products to vaporizers. Most of its vaporizers are produced in China, so the company suffered a product shortfall in early 2020. Then came the state-level lockdowns that closed indoor purchasing to the public. Finally, supply chain bottlenecks in shipping ports hurt it during the holidays. These factors made for a forgettable 2020.

Thankfully, good news is stacking up for 2021 and beyond. The company has exited its hemp trading operations to focus on meeting the needs of large U.S. MSOs. In fact, one of the top five MSOs in the U.S. signed a long-term contract with KushCo during the fiscal first quarter of 2021. Although supply issues and ending its hemp trading operations caused year-over-year sales to fall in Q1 2021, expenses were also way down. KushCo lost only $0.01 per share on an adjusted basis in the recently ended quarter.

The company impressively upped its full-year sales forecast by $10 million on the high and low end to a new range of $130 million to $160 million. It also expects to generate between $5 million and $7 million in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). In short, KushCo looks to finally be turning the corner. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Kush Bottles, Inc. Stock Quote
Kush Bottles, Inc.
KSHB
The Valens Company Stock Quote
The Valens Company
VLNCF
$0.72 (11.11%) $0.07
Columbia Care Inc. Stock Quote
Columbia Care Inc.
CCHWF
$1.39 (4.12%) $0.06

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.