For those seeking out Wall Street’s favored cannabis stocks, look no further than the AdvisorShares Pure US Cannabis ETF (NYSEARCA:MSOS) – the premier U.S.-listed cannabis exchange traded fund known as an ETF, boasting close to $1 billion in net assets. This notable sum dwarfs its closest competitor, the Amplify Alternative Harvest ETF (NYSEARCA:MJ), with a modest $243 million in net assets.
However, investing in the MSOS since its inception in September 2020 has been far from a euphoric journey. In 2021, its overall return plummeted by 29.7%, followed by a staggering 72.7% decline in 2022, only to make a slight comeback with a 0.29% increase in 2023. There is a glimmer of hope as it has surged by over 32% in 2024, including a captivating 23% gain within just five trading days between March 13 and March 19. What could account for this sudden change?
On March 15, Vice President Kamala Harris urged the U.S. Drug Enforcement Agency (DEA) to accelerate the reconsideration of reclassifying cannabis from a Schedule 1 to a Schedule 3 drug, marking a significant step towards nationwide legalization.
Considering this favorable development, let’s delve into three captivating cannabis stocks that Wall Street currently adores and recommends for investment. Each of these three is indeed a vital component of the AdvisorShares Pure US Cannabis ETF.
Green Thumb Industries (GTBIF)
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Green Thumb Industries (OTCMKTS:GTBIF) commands the largest share within the ETF, with a portfolio weight of 25.6%. Currently, 15 out of 17 analysts covering the stock rate it as a Buy, pinpointing a target price of $16.29, a 23% surge from its present value. Year-to-date, GTBIF stock has seen an impressive rise of nearly 23%.
Established in 2014, Green Thumb Industries produces a range of products including the renowned RYTHM flower, Dogwalkers pre-rolls, and Incredibles edibles, among others. Maintaining a foothold with 20 manufacturing facilities, it operates 92 RISE retail outlets across 14 U.S. markets. In 2023, the company witnessed a 4% increase in sales, reaching $1.1 billion, coupled with an adjusted EBITDA of $326 million. On a GAAP basis, the earnings stood at $36 million.
CEO and founder Ben Kovler remarked in the Q4 2023 press release, “We concluded the year with a robust balance sheet, inclusive of $162 million in cash, net of a $65 million return to shareholders through share repurchases and debt redemptions.”
The robust cash flow throughout 2023 enabled the repurchase of $39.9 million worth of its stock, at an average price of $10.50, substantially lower than its present trading value.
Curaleaf Holdings (CURLF)
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Curaleaf Holdings (OTCMKTS:CURLF) holds the second-largest position within MSOS’ portfolio, with a significant weight of 19.93%. Of the 14 analysts tracking its performance, 11 advocate for a Buy rating, setting a target price of $5.91, which exceeds its current value by 20%. Thus far in the year, CURLF stock has soared by nearly 23%.
Making headlines on March 19, Curaleaf declared its acquisition of the licensed Canadian producer Northern Green Canada, driven primarily by its EU-GMP certification aimed at the European markets. Presently, it distributes high THC (tetrahydrocannabinol) products in the German market, Australia, and New Zealand. The terms of this transaction were undisclosed.
Concluding the year with $1.35 billion in net revenue, marking a 6% increase from 2022, Curaleaf boasted an adjusted EBITDA of $304.5 million and an impressive adjusted EBITDA margin of 23%. Despite these achievements, it encountered losses on a GAAP basis. As of year-end, the company operated 145 dispensaries and 21 cultivation sites spanning 17 states, with a cultivation capacity of approximately 1.45 million square feet.
Notably, upon federal legalization of cannabis across the United States, Curaleaf is poised to emerge as a prominent consolidator within the industry.
Trulieve Cannabis (TCNNF)
Trulieve Cannabis: Blossoming Amidst Fiscal Fortunes
The Tax Break Story
Trulieve Cannabis (OTCMKTS: TCNNF) finds itself flourishing amidst adversity in the cannabis industry as one of the top three holdings for MSOS, boasting an 18.46% portfolio weight. The stars continue to align, with 13 out of 14 analysts rating it a Buy and setting a target price of $14.75 – a staggering 31% above its current value. The stock itself has surged by an impressive 118% since the start of the year.
Riding the Revenue Wave
In an era where profitability for cannabis companies has been elusive, Trulieve hit the jackpot in 2023, securing a monumental $113 million in tax refunds. By amending its federal tax returns for the years 2019 to 2021, the company successfully sought refunds of $143 million federally and $31 million at the state level, while eagerly awaiting news on an additional $60 million in refunds.
The Financial Flourish
Revealing its financial prowess, Trulieve reported a revenue of $1.13 billion in 2023 with an impressive adjusted EBITDA of $322 million, equating to a robust 29% margin. Operating cash flow stood strong at $202 million, with forecasts predicting a rise to $225 million in 2024. Noteworthy is the record-breaking free cash flow of $161 million in 2023, marking a remarkable 214% surge from the previous year.
Fueling Growth through Dispensaries
With an enterprise value of $2.73 billion, Trulieve boasts a free cash flow yield exceeding 5%, well within the fair value range of 4% to 8%. Holding 192 dispensaries spread across nine states, the company solidifies its position as one of the nation’s largest vertically integrated cannabis operators, poised for continued growth and success.
On the publication date, Will Ashworth disclosed no direct or indirect positions in the securities discussed. The opinions conveyed are in line with the InvestorPlace.com Publishing Guidelines.
