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Top Cannabis Stocks for Q4 2023

Investors can track the cannabis sector by following the ETFMG Alternative Harvest ETF (MJ), which comprises the major publicly listed cannabis stocks. The fund has slumped more than 43% over the past year compared with the large-cap Russell 1000 Index, which has posted a gain of about 15% over the same period. Below, we review the top cannabis stocks based on best value, highest growth, and best 12-month stock performance. All data is as of Nov. 24, 2023.

Best Value Cannabis Stocks

The cannabis stocks below have the lowest 12-month trailing price-to-sales (P/S) ratio. The ratio compares a company’s stock price with its revenue, indicating the value investors have placed on each dollar of its sales. Since many cannabis stocks are in the early stages of development, investors can use the P/S ratio to help determine which firms in the industry have the best chance of becoming profitable.

Best Value Cannabis Stocks
  Price ($) Market Capitalization ($M) 12-Month Trailing P/S Ratio
SNDL Inc. (SNDL) 1.50 390 0.6
Organigram Holdings Inc. (OGI) 1.29 105 0.9
Aurora Cannabis Inc. (ACB) 0.48 208 0.9

Source: TradingView

  • SNDL Inc.: The firm produces, distributes, and sells cannabis products in Canada across four business segments: liquor retail, cannabis retail, cannabis operations, and investments. For the third quarter, the company reported a net loss that shrank by 78% over the third quarter of 2022, and its total revenue grew by 6% over the previous year.  
  • Organigram Holdings Inc.: A Canadian firm, Organigram produces and sells cannabis and other similar products. Its brands include SHRED, Monjour, Edison Cannabis Co., and Tremblant. Organigram also sells its products wholesale. On Nov. 10, it said that its chief financial officer, Derrick West, was leaving the role. Paola De Luca was appointed as the interim chief financial officer.
  • Aurora Cannabis Inc.: Located in Canada, Aurora produces, distributes, and is a wholesaler of cannabis products for medical and consumer uses, as well as cultivation processing.

Fastest-Growing Cannabis Stocks

The cannabis stocks below have generated the highest year-over-year sales growth during the most recent quarter. A cannabis company with growing sales is expanding its customer base and market share, suggesting it can increase earnings per share. Investors should look at sales growth along with other metrics when analyzing stocks in the cannabis industry.

Fastest-Growing Cannabis Stocks
  Price ($) Market Cap ($M) Revenue Growth (%)
SNDL Inc. (SNDL) 1.50 390 79
Aurora Cannabis Inc. (ACB) 0.48 208 33
Organigram Holdings Inc. (OGI) 1.29 105 20

Source: TradingView

  • SNDL INC.: See the company description above.
  • Aurora Cannabis Inc.: See the company description above.
  • Organigram Holdings Inc.: See the company description above.

Cannabis Stocks with the Best Performance

The cannabis stocks below have generated the best 12-month return, although none of the stocks gained in value. Momentum investors argue that stocks displaying relative strength to others within the industry will likely continue outperforming.

Cannabis Stocks with the Best Performance
  Price ($) Market Cap ($M) 12-Month Trailing Total Return (%) 
SNDL Inc. (SNDL) 1.50 390 -41
Tilray Brands Inc. (TLRY) 1.80 1,320 -51
Aurora Cannabis Inc. (ACB) 0.48 208 -64
Russell 1000 Index N/A N/A 15
ETFMG Alternative Harvest ETF (MJ) N/A N/A -43

Source: TradingVie

  • SNDL Inc.: See the company description above.
  • Tilray Brands Inc.: The company researches, cultivates, processes, and distributes medical cannabis products in Canada, the U.S., Europe, Australia, New Zealand, and Latin America. It has four divisions: Cannabis Business, Distribution Business, Beverage Alcohol Business, and Wellness. In October, Tilray Brands said it had acquired eight beverage brands from Anheuser-Busch. The deal increased Tilray Brands’ share of the U.S. craft beer market to 5%.
  • Aurora Cannabis Inc.: See the company description above.

Advantages of Investing in Cannabis Stocks

Growth potential: Cannabis stocks have significantly underperformed the broader stock market over the past year. Yet, the sector offers growth opportunities for investors who are not too risk-averse. According to MJBizDaily, the sector’s trade magazine, U.S. cannabis sales are projected to top $33 billion in 2023, reaching almost $57 billion by 2028. Global cannabis sales are forecast to have a compound annual growth rate of 34% between 2023 and 2030.

Increasing acceptance: As of August 2023, 47 states and Washington, D.C. have at least partially legalized cannabis and related products, indicating an increased acceptance by American consumers. As cannabis continues to enter the mainstream, more industry-friendly legislation and banking provisions could further accelerate the sector’s growth. 

Disadvantages of Investing in Cannabis Stocks

Limited access to financial services: Many companies in the cannabis industry have limited access to traditional financial services, such as banking and advisory, because of the sector’s complex regulatory environment. The U.S.’s Controlled Substances Act continues to make cannabis illegal at the federal level, making financial institutions leery of working with cannabis-related businesses. This has prevented smaller cannabis companies from raising capital and expanding operations, which has made it difficult to compete with larger, more established competitors.

Competition and oversupply: The cannabis industry is highly competitive, with many companies vying for market share. This, at times, results in oversupply and falling prices, hurting the profitability of cannabis companies. For instance, Cannabis Benchmarks’ volume-weighted U.S. spot index for wholesale cannabis flower plummeted 27% in 2022 on the back of a supply glut. The increased competition and oversupply have made it more difficult for investors to generate returns from their investments in cannabis stocks.

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As of the date this article was written, the author does not own any of the above stocks or ETFs.

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