The growing requirement of cannabidiol oil for therapeutic needs from an aging population, and a growing consumer preference for innovative recreational cannabis products, have been driving the cannabis industry’s growth. The global spending on legal cannabis is expected to reach $43 billion by 2024. Last week, the U.S. Department of Agriculture (USDA) announced steps to improve insurance policies for hemp businesses to make them more flexible. Also, the record high support from U.S. adults and GOP lawmakers has generated positive sentiment concerning the cannabis market.
However, medicinal cannabis company Aurora Cannabis Inc.’s (ACB), which is based in Calgary, Canada, has not benefited from the favorable industry trends. In its last reported quarter, the company’s total net revenue decreased 11.1% year-over-year to CAD60.11 million ($47.54 million). The stock has declined 34.6% in price over the past six months and 38% over the past year. Furthermore, the stock’s average price target of $6.31 represents a potential 4% decline from its $6.57 last closing price. Therefore, we think ACB may not be the right choice to cash in on the industry tailwinds.
Instead, pot stocks Curaleaf Holdings, Inc. (CURLF), Tilray, Inc. (TLRY), and HEXO Corp. (HEXO), which possess strong fundamentals, could be ideal bets to capitalize on industry trends. Wall Street analysts expect these stocks to deliver solid returns in the coming months.
Click here to check out our Cannabis Industry Report for 2021
Curaleaf Holdings, Inc. (CURLF)
CURLF is a vertically integrated cannabis operator that is headquartered in Wakefield, Mass., that researches and develops capabilities to distribute cannabis products. The company operates in two segments: Cannabis Operations; and Non-Cannabis Operations. Through its Curaleaf Hemp brand, the company provides service across the medical and adult-use markets and the cannabidiol (CBD) category.
Last month, CURLF collaborated with Fab 5 Freddy (an American visual artist, filmmaker, and hip hop pioneer and a New York native) and expanded its B NOBLE partnership into medical dispensary locations in New York. B NOBLE should generate support for the defense of people impacted by the War on Drugs in New York. Also, this is one of CURLF’s first expansions in New York, because the New York Cannabis Control Board has approved the whole flower as part of its medical marijuana offerings.
CURLF’s total revenue for the third quarter, ended September 30, 2021, increased 73.9% year-over-year to $317.13 million. The company’s gross profit grew 57.8% from its year-ago value to $182.73 million. Its income from operations rose 144.3% from the prior-year quarter to $39.99 million. Also, the company’s adjusted EBITDA increased 68.7% year-over-year to $71.36 million.
CURLF’s revenue is expected to increase 37.8% year-over-year to $1.68 billion in its fiscal 2022. And its EPS is expected to grow 183.3% next year.
Closing the last trading session at $9.44, the $18.78 average analyst price target represents a 98.9% potential upside.
Tilray, Inc. (TLRY)
TLRY in Nanaimo, Canada, is a cannabis supplier that produces and markets medicinal cannabis products to the pharmaceutical sector. The company operates through five segments: Cannabis Business; Distribution Business; Beverage Alcohol Business; Wellness Business; and Business Under Development. Also, its subsidiary, FHF Holdings Ltd (Manitoba Harvest), manufactures, markets, and distributes hemp-based consumer products.
This month, TLRY acquired Breckenridge Distillery, a distilled spirits platform located in Breckenridge, Colorado, that is known for its bourbon whiskey collection and innovative craft spirits portfolio. With this strategic acquisition, TLRY expects to strengthen its strategic position in the U.S. and gradual growth in its EBITDA.
During its fiscal first quarter, ended August 31, 2021, TLRY’s net revenues increased 43% year-over-year to $168.02 million. The company’s gross profit grew 46% from its year-ago value to $50.96 million. Its Cannabis segment revenue rose 37.6% from the prior-year quarter to $70.45 million. Also, the company’s cash and cash equivalents came in at $376.3 million during this period.
A $879.9 million consensus revenue for the fiscal period ending May 2022 represents a 43.9% increase year-over-year. The stock has soared 15.9% in price over the past year.
The consensus price target of $13.97 represents a 45.4% potential gain from the last closing price of $9.61.
HEXO Corp. (HEXO)
HEXO is a Gatineau, Canada-based consumer packaged goods cannabis company that creates and distributes products for the cannabis market. The company serves the adult-use market through its HEXO, HEXO Plus, Up, Bake Sale, Namaste, REUP, Original Stash brands, and the medical market through its HEXO brand. In addition, it provides cannabis beverages under Little Victory, House of Terpenes, XMG, Mollo, and Veryvell brand names.
For its fiscal fourth quarter, ended July 31, 2021, HEXO’s total revenue increased 42.8% year-over-year to CAD38.76 million ($30.66 million). The company’s gross profit came in at CAD3.23 million ($2.56 million), compared to a CAD34.69 million ($27.44 million) gross loss in the prior-year quarter. Its loss from operations decreased 43.6% from its year-ago value to CAD59.88 million ($47.36 million). Also, the company’s net loss declined 59.9% year-over-year to CAD67.96 million ($53.75 million).
HEXO’s $213.47 million consensus revenue for its fiscal period ending 2022 represents a 120.2% increase year-over-year. Its EPS is expected to grow 64.3% in the current year. The stock has surged 17.4% in price over the past five trading days.
Closing its last trading session at $1.1, the $1.52 average analyst price target represents a 38.2% potential upside.
Click here to check out our Cannabis Industry Report for 2021
CURLF shares were trading at $9.18 per share on Thursday afternoon, down $0.26 (-2.75%). Year-to-date, CURLF has declined -23.32%, versus a 26.52% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research.
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