Marijuana Reform Is Budding. So Are These 2 Pot Stocks.

While marijuana legalization at the federal level may not be the burgeoning reality that proponents had hoped it would be by now, the progress that has been made at the state level has created a wealth of opportunity for cannabis companies as well as for investors. Currently, 38 out of 50 states have at least partially legalized marijuana for medical purposes, while 19 states have legalized recreational use.  

Don't get me wrong, not all cannabis stocks are created equal. There are too many cannabis companies that don't necessarily have the tailwinds for growth or underlying business to navigate this turbulent market. On the flip side, this could be the perfect time for risk-tolerant investors to scoop up promising marijuana stocks with the growth trajectories to drive future growth and returns. 

Here are two such stocks to consider buying right now. 

1. Trulieve 

It's true that investors in Trulieve Cannabis (TCNNF 2.03%) haven't had the best year, with shares trading down nearly 60% year to date as bearish sentiment about marijuana stocks has dragged the sector down as a whole. And there are a few additional reasons Trulieve's stock has been hit so hard in recent months. 

For one, there's its accumulation of considerable long-term debt after its $2.1 billion acquisition of Harvest Health late last year. Then, there was a downgrade in its annual earnings guidance for 2022, not surprising in an environment where inflation is high and oversupply is impacting pot sales nationwide. 

All that being said, let's take a step back from these near-term dynamics, which should not pose durable headwinds to Trulieve's future growth. Before the Harvest Health acquisition, Trulieve was already one of the biggest names in the industry and the largest cannabis operator in the state of Florida -- the nation's largest medical marijuana market on track to hit sales upward of $1.5 billion in 2022 alone.  

Following the Harvest Health acquisition and other expansions it's announced since, Trulieve now has a footprint that spans 11 states and roughly 170 retail locations. As of the most recent quarter, the company has grown its retail presence so that 32% of its stores are now outside of Florida, where it is still the largest medical marijuana operator in the state. Trulieve also boasts heavy concentrations in the adult-use markets of Arizona and Massachusetts, as well as the medical-use state of Pennsylvania.   

While the company reported a net loss in the most recent quarter as it works down the impact of its Harvest Health acquisition, which represented an improvement of 30% from the quarter prior. Trulieve still reported 49% year-over-year revenue growth in the three-month period, along with adjusted EBITDA growth of 17%. The company also closed the quarter with a healthy $181 million in cash on its balance sheet.  

And looking back over a much longer period -- investments with long-term potential have historically been the best after all -- in the trailing five years, Trulieve has grown its annual revenue and net income by 813% and 66%, respectively. It's also increased its annual liquidity by a notable 844% during that same five-year window.  

While the near-term horizon may contain its share of volatility, Trulieve's strong financial track record, rapidly diversifying business model, and strong market presence form a solid foundation on which to pursue future growth. And Wall Street analysts think the stock could have an upside as high as 390% over the next 12 months alone.

2. Green Thumb Industries 

Green Thumb Industries (GTBIF 2.46%) bears the distinction of not only being a marijuana stock with an enviable history of top-line growth but one that is profitable as well. 

Over the past two years, the company has increased its annual revenue by a mouth-watering 61%. During that same period, its annual net income has risen by a notable 403% and operating cash flow by nearly 40%.  

Fast-forward to the most recent quarter, and Green Thumb Industries reported revenue of $254 million, representing year-over-year growth to the tune of 15%. It also generated adjusted operating EBITDA of $78.7 million in the three-month period, a 17% jump from the same period in the prior year.  

This steady pattern of growth can be attributed to Green Thumb's diverse and profitable portfolio of retail stores and cannabis brands. The marijuana stock's footprint spans 15 states with 77 total retail locations and counting, as well as more than a dozen manufacturing facilities. Its brands sell everything from cartridges to premium flower to edibles.  

Illinois, where the company is headquartered and has its highest number of retail dispensaries, hit $135 million in marijuana sales in July 2022 alone. The company also boasts a robust presence in key markets like Pennsylvania, Virginia, Florida, and Nevada.  

Green Thumb's top-selling family of brands, burgeoning national footprint, and profitable business model are all compelling reasons to consider this stock for a long-term investment.

Currently, analysts estimate the cannabis stock could have a median upside of 77% over the next year alone.