A good thing about market decline is that it creates investment opportunities since even strong businesses see their stocks tumble. That said, shares of companies belonging to fast-growing industries, such as cannabis, offer greater prospects for investment capital to multiply. In addition, growth stocks take time to price in the business's full potential, making them useful for long-term investors with a strong risk appetite.
Despite marijuana stocks' recent turmoil, Wall Street analysts remain bullish. For those looking for top pot stocks to own at a bargain, I have just the right three in mind. These companies are expanding aggressively and are built to flourish regardless of the legalization of marijuana at the federal level.
So far this year, these stocks have declined, in fact, much more than the S&P 500's fall of 13%. But there are reasons why Street analysts strongly believe these could bring in a fortune over the long haul.
Here's what you should know.
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Trulieve Cannabis: An implied upside of 283%
In the past, investors questioned Trulieve Cannabis' (TCNNF -4.35%) high reliance on its home market, Florida. But I applaud this move. Trulieve played it smart by solidifying its roots with 115 dispensaries -- now dominating the state market. This strategy should also benefit the company if the state legalizes recreational marijuana in the future.
Despite a strong home turf, Trulieve's strategic acquisition of Harvest Health last year solidifies its presence in Arizona, Pennsylvania, and Maryland as well. It generated close to $938 million in revenue in 2021, a surge of 80% over the prior year. The fourth quarter marked its 16th consecutive quarter of profitability from an operational standpoint. Adjusted net income jumped 2% year over year, to $123 million for the year. It ended the year with $234 million in cash and cash equivalents.
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Trulieve sees 2022 as another year of solid growth. Management expects revenue to show up in the range of $1.3 billion to $1.4 billion and adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) in the range of $450 million to $500 million. We will know more about how Trulieve plans to hit these goalposts when it releases its first-quarter results on May 12. Trulieve's stock price has an upside of 283% over the next 12 months, based on consensus expectations of five analysts on the Street.
Cresco Labs: An implied upside of 230%
Cresco Labs (CRLBF -4.00%) made a power move last month when it announced its decision to acquire New York-based cannabis company Columbia Care (CCHWF -2.81%). With a market cap of $770 million, Columbia Care is a rising cannabis company with a trailing-12-month revenue of $460 million.
Cresco, which operates 50 stores now, will have a widened national footprint of 130 stores in 18 states if the deal, expected to close by Q4 this year, goes through.
Its 2021 total revenue stood at $822 million, a year-over-year growth of 73%. Adjusted EBITDA also showed a massive 219% improvement year-over-year, to $194 million. Meanwhile, Columbia Care's total revenue for the year jumped 156% YoY to $460 million, while adjusted EBITDA of $57 million came in better than a loss of $19 million in 2020.
Cresco's strategy of adding another strong cannabis company to its portfolio is a smart move. The deal should help establish a more dominant U.S. presence while minimizing competition in an expanding market. Management believes this deal could push them to achieve "70% of the addressable cannabis market" by 2025.
Its home market, Illinois, has proven useful ever since it legalized recreational cannabis in January 2020. The state generated $1.4 billion in recreational sales in 2021. It operates 10 stores in the state.
Cresco will shed light on its strategies for 2022 when it releases its first-quarter results on May 18. It's no surprise why Wall Street analysts also see a bright future for Cresco once the deal finalizes, which is why they expect a potential upside of 230% in Cresco's stock price over the next 12 months.
Green Thumb Industries: An implied upside of 150%
Headquartered in Illinois, Green Thumb Industries (GTBIF -2.80%) believes in generating cash flow that could drive it to success over the long term.
The first quarter marked its ninth consecutive quarter of positive free cash flow, which came in at $55 million. Why is it important? Obtaining capital is still an issue for U.S. marijuana companies, as the drug is illegal federally. Thus, positive cash flow from operations allows it to repay its debts and invest in further expansion.
The key advantages of Green Thumb are its location and its edibles segment -- which consistently helped profitability. In 2021, it entered three new states: Virginia, Rhode Island, and Minnesota. It operates 77 dispensaries in 15 states. Its home market Illinois' strong recreational sales in the last two years also boosted its revenue. It operates six stores in the state.
Green Thumb's brand Incredibles (gummies and chocolates) has ranked in the top five of the 20 best edibles in the market.
Perhaps these factors helped it garner a 25% year-over-year growth in revenue to $243 million for the quarter. Its seventh consecutive quarter of GAAP net income came in at $29 million, versus $10 million in the year-ago period. Its ability to grow revenue consistently, while turning a profit in a highly competitive market, makes it one of my top marijuana picks.
Estimates show that the cannabis industry could grow at a compounded annual growth rate (CAGR) of 14% to be worth more than $70 million by 2030. All three of these stocks are down more than 60% from their all-time highs, making it the right time to grab them on the dip.
