Good things come to those who wait. When you're investing in cannabis stocks, that catchy little quote is as true as ever, and, much to marijuana investors' chagrin, the industry's ongoing pullback is indeed the ideal time to be patiently watching and waiting for opportunities to arise.

But not every recently fallen cannabis stock is a good candidate for buying, and there aren't too many attractive opportunities out there right now. On the bright side, there are almost certainly going to be quite a few lucrative investments to make in the cannabis industry over the next three years.

Let's discuss two companies that you should add to your watch list and keep track of in order to evaluate their turnarounds, or lack thereof, so that you'll be ready to invest when and if opportunity knocks.

A customer investigates marijuana products in a display case in a dispensary while a worker talks with another customer at the checkout.

Image source: Getty Images.

1. Canopy Growth

Canopy Growth (CGC -1.80%) investors have had a rough go of it, with shares falling by nearly 69% over the last 12 months. But it's not too surprising why that happened.

Earlier this year, Canopy finalized its sale of its Canadian cannabis retail operations, meaning that it now has less of an ability to compete in its home market. That news came on the heels of its announcement in late 2022 describing the company's new strategy of competing primarily in the U.S. cannabis market, not to mention its FY 2023 Q3 earnings indicating that its quarterly revenue declined by 28% year over year and 7.4% compared to three years ago, reaching CA$101.2 million.

Simply put, it's hard to believe that exiting one market to enter another is going to improve its margins in the way that management has claimed.

But time will tell if the strategy is sound, and Canopy is taking steps to make sure that its finances are capable of supporting its aims. On Feb. 21, it issued around CA$203 million worth of convertible debentures to raise capital. In conjunction with its previous cash holdings of nearly CA$797 million, it should have enough to sustain its trailing-12-month (TTM) cash burn of CA$558.8 million for at least a year or so, especially when considering that management plans to realize cost savings worth as much as CA$160 million over the coming 12 months.

It also plans to slash its workforce by a shocking 60%. With such a large reduction in its workforce in Canada, it now needs to simultaneously scale up its workforce in the U.S. That implies that management's cost savings target will be quite difficult to actually reach, as onboarding new employees can be expensive, and doing its layoffs won't be free either.

So, while it's a bit too risky to invest in Canopy Growth today, as its strategy is of questionable merit, it's worth monitoring for the next few months to a year because it could be a good investment if it can make a turnaround. If its plan to compete in the U.S. is going to work, there should be some evidence of its U.S. subsidiary grabbing market share within a year and a half. After that, it'll likely need to spend at least another year trimming more fat from its operations, potentially becoming profitable in the process. There's nothing to suggest shareholders will have an easy ride in the interim, and it makes sense to be skeptical about its plans for now.

And if there's no progress toward realizing massive top- and bottom-line expansion by early 2026, there's a good chance it'll be leapfrogged by the competition, and it's unlikely to be a good investment at that point either.

2. Curaleaf

Curaleaf (CURLF -1.50%) is another cannabis business that's entering a potentially transformative period. While the company is expanding its footprint in Florida, Connecticut, New Jersey, and elsewhere, it exited the vibrant marijuana markets of California, Oregon, and Colorado in early 2022, cutting its head count by 10% in the process.

That's part of the reason why its shares are down by around 48% in the last year. Fleeing those markets should lead to around $60 million in annual savings at the cost of less than $50 million in revenue lost. With TTM revenue of more than $1.3 billion, those sales won't be missed by much, though it will doubtlessly make year-over-year growth figures look a bit worse for a while.

While it's slightly unprofitable, with TTM net losses of $127.3 million, it has $197.6 million in cash and short-term investments, so its TTM cash burn of $88.8 million doesn't look unsustainable at the moment. Nonetheless, its quarterly margin has worsened considerably over the last three years, and it's unclear if the latest cuts will be enough to bring it to profitability. Falling legal cannabis prices in the U.S. over the last year are surely making its profitability issue worse, though it's possible that prices will rise again later in 2023, which could potentially help it become profitable again by early 2024 if everything else goes as planned.

Eventually Curaleaf plans to expand internationally, and building out smaller operations in the E.U. is likely its first step. It'll be hard to square the goals of becoming more efficient while also making a big foray into international markets. 

But if Curaleaf can pull off its plan, it'll be a profitable and growing business with the ability to serve growing demand for cannabis spread across two continents. In the short-term, the chances of it succeeding aren't great, as cannabis prices in the U.S. will take plenty of time to recover, which will be a continual drag on its margin. But the cannabis market will probably eventually recover, perhaps around the same time Curaleaf is itself turning a corner, so there's still plenty of hope for its future. Look for its gross margin to start showing an improvement alongside top-line growth over the next few quarters. If the margin isn't rising after two years, it'll spell trouble, and there might not be much point in investing after that.