There's renewed hype around prospects for marijuana legalization in the U.S. after President Biden recently announced he would pardon thousands of people convicted under federal law of simple marijuana possession. Although that doesn't mean marijuana legalization is imminent, it's the biggest move the current administration has made toward reform.
If you're optimistic about federal legalization, then there are four pot stocks that could be excellent buys, with all of them trading for less than $20 per share: Curaleaf Holdings (CURLF -0.58%), Green Thumb Industries (GTBIF 0.67%), Trulieve Cannabis (TCNNF -2.29%), and Jushi Holdings (JUSHF -0.21%). Although the industry has struggled over the past year (due to a lack of progress on legalization) and these stocks are down big, here's why they are some of the best options for marijuana investors today.
1. Curaleaf Holdings
Multistate marijuana producer Curaleaf Holdings is one of the most popular cannabis companies in the country. It runs 144 dispensaries in 21 states. It's in top cannabis markets such as Florida, California, Illinois, and Massachusetts, and also has a presence in states that have recently legalized recreational pot, including New York and New Jersey.
Legalization would allow Curaleaf to operate more efficiently by enabling it to take advantage of its vast operations. It can't currently transport products from one state to the other due to the federal ban on pot. If that were lifted, Curaleaf could benefit from economies of scale and have a profitable business, making it a more tenable long-term investment. Over the trailing 12 months, the company has incurred a net loss of $130.4 million on revenue of just under $1.3 billion.
However, the company is normally profitable on an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) basis, reporting margins of 26% in the second quarter.
Trading at about $5, Curaleaf stock is nowhere near the $20 mark. Over the past 12 months, the shares have declined more than 40%, although that's still better than the Horizons Marijuana Life Sciences ETF (down 57%).
2. Green Thumb Industries
Green Thumb Industries is another large cannabis company that marijuana investors should consider for a long-term investment. It offers several different consumer brands aimed at fitting various styles and preferences. It has 77 retail locations and a presence in 15 markets across the country. The company estimates that it reaches about half of Americans based on its footprint.
In terms of revenue, Green Thumb is a bit smaller than Curaleaf, reporting sales of $974.2 million over the past four quarters. During that time, however, the company has posted a profit of $96.4 million, making it one of the few truly profitable businesses in the industry. And it too could benefit from significant opportunities to achieve efficiencies upon legalization, potentially making it an even better buy over the long term.
Shares of the company are trading at about $10, as it too has struggled to attract investors during the past 12 months. It's fallen 56% during that time, in line with the Horizons Marijuana ETF.
3. Trulieve Cannabis
Another leading cannabis company in the industry is Trulieve Cannabis. A year ago, the company closed on its acquisition of fellow multistate operator Harvest Health & Recreation. The move diversified and expanded Trulieve's business significantly; before then, Trulieve depended heavily on the Florida market. And while it still has a huge presence in the Sunshine State (with more than 100 dispensaries there), nearly a third of its 177 locations are now outside of Florida.
Trulieve operates in 11 states across the country, claiming to have "leading market positions" in three of them: Arizona, Florida, and Pennsylvania.
The company's acquisition of Harvest Health has hurt its margins, however, and Trulieve reported a net loss of $107.4 million over the past 12 months (in previous years the company has been profitable). Legalization could help get its operations back into the black. At just under $1.2 billion in revenue over the trailing 12 months, Trulieve is another top pot stock with potential for even more growth opportunities in the future to expand its presence into more states.
During the past year, its shares have fallen 63%. Trulieve's stock also trades at about $10.
4. Jushi Holdings
The smallest cannabis company on this list is Jushi Holdings, which has generated a relatively modest $254.5 million in sales over the trailing 12 months. Although net income was $39.7 million as a result of gains on derivatives, the company had significant operating losses. But this is company with plenty of growth potential.
By the end of this year, Jushi will have 37 stores up and running in seven states -- including 18 in Pennsylvania, its largest footprint. By the end of 2023, it will be up to 50 locations. With its rapid expansion, Jushi's management expects that the company will be at an annual revenue run rate of up to $350 million by the end of this year, meaning that its top line should be at least that high in 2023. The company also said it will also be at an adjusted EBITDA margin that's in the low double digits.
Jushi's stock trades at about $1.55, making it the cheapest pot stock on this list. In 12 months, its shares have plunged by about 60%. But with the company a bit earlier on in its growth stages than the other pot producers on this list and staking out a strong position in a Pennsylvania market that hasn't yet legalized recreational marijuana use, Jushi could make for an underrated pot stock to buy and hold.
