Reddit users have been high on Tilray (TLRY 0.58%) in recent months. Their enthusiasm has been warranted based on the Canadian cannabis producer's stock performance. Tilray's shares have skyrocketed more than 160% year to date.
But even the staunchest Tilray fans on Reddit could be thinking the same thing that Janet Jackson sang in the '80s: "What have you done for me lately?" Over the last three months, the marijuana stock is down 10%.
Sure, Tilray could stage a mighty comeback. However, here are three better stocks to buy than Tilray for investors seeking to profit from the cannabis boom.
Image source: Getty Images.
Ayr Wellness
Tilray can only hope to enter the lucrative U.S. cannabis market, but Ayr Wellness (AYRW.F -5.67%) is already an up-and-coming star south of the border. Ayr's acquisitions strategy has made it one of the top multistate cannabis operators in the U.S.
Just this year, Ayr has successfully closed three key deals. The biggest of these is the company's purchase of Liberty Health Sciences. Ayr's acquisition of Liberty gave it the fourth-largest retail presence in Florida's medical cannabis market. Ayr CEO Jonathan Sandelman thinks that Florida has the potential to rival California if the state legalizes recreational marijuana.
Ayr now has operations in six states. It will add a seventh state to the list this summer -- New Jersey -- once the pending acquisition of Garden State Dispensary closes.
In comparison to other Canadian pot stocks, Tilray looks downright cheap with a price-to-sales (P/S) ratio of 8.8. However, Ayr's valuation blows Tilray away, with shares trading at less than five times sales.
Ayr is also growing faster than Tilray, to boot. I expect Ayr will easily outperform Tilray over the next few years.
Cresco Labs
Most of the accolades for Ayr also apply to Cresco Labs (CRLBF -4.76%). Like Ayr, Cresco has relied heavily on acquisitions to fuel its growth. However, the U.S. cannabis operator has also benefited from strong organic growth.
Cresco's biggest acquisition thus far was the purchase of Origin House in early 2020. The deal helped make the company the No. 1 wholesaler of branded cannabis products in the U.S. So far in 2021, Cresco has closed acquisitions in Florida and Ohio and is awaiting the close of another deal in Massachusetts.
There's a lot to like about Cresco's financial performance. The company reported revenue of $178.4 million in Q1, up nearly 169% year over year. It generated adjusted earnings before interest taxes, depreciation, and amortization (EBITDA) of $35 million, more than six times higher than in the prior-year period. Tilray can't match those numbers.
If you think that Ayr's valuation is attractive for a pot stock, you'll love Cresco. Its shares currently trade at only 4.2 times sales. And Cresco looks for more strong sales growth with an annualized revenue run rate topping $1 billion by the end of this year.
Trulieve Cannabis
Tilray bills itself as the cannabis company "with the largest global geographic footprint in the industry." But it's not the most profitable cannabis company. That distinction belongs to Trulieve Cannabis (TCNNF -5.95%). And unlike Tilray, Trulieve operates in the world's largest cannabis market.
I've already mentioned that Ayr and Cresco have completed acquisitions that enable them to compete in Florida's fast-growing medical-cannabis market. They won't have an easy time dethroning Trulieve, though. The company commands a market share in Florida of close to 50%.
Trulieve would have great growth prospects, even if it only focused on Florida. The medical cannabis market in the state is projected to reach $2.6 billion by 2025. However, Trulieve has already expanded its geographical reach into other states and is about to expand even more with its acquisition of Harvest Health & Recreation.
Analysts predict that Trulieve's stock price could soar 90% or more over the next 12 months. What do they think about Tilray? The consensus analysts' price target reflects an upside of less than 2%. I don't always agree with Wall Street, but in this case, I suspect the analysts are picking the right winner.
