Top 4 Cannabis Stocks to Watch Ahead of Potential Federal Policy Changes

When it comes to investing in the legal marijuana industry, they don't call it the "green rush" for nothing. Many analysts are projecting massive growth for the cannabis industry. New Frontier, a Washington D.C.-based cannabis research firm, expects total U.S. legal cannabis sales to exceed $57 billion by 2030.

In light of such tremendous growth potential, many see marijuana as a golden investment opportunity. Cannabis is now legal in 37 states for medical use and fully legal in 23 states. However, on a federal level, its status has barely changed since the 1970s, sharing the same classification as heroin, ecstasy, and LSD.

Cannabis stocks jumped after the U.S. Department of Health and Human Services recommended easing restrictions on marijuana in August. With that date approaching, let's take a look at a few stocks in the sector for your radar.

KindlyMD, Inc. (NASDAQ: KDLY) is a healthcare company focused on integrating traditional primary care and pain management with behavioral and alternative therapies to combat opioid dependency in the U.S. As Utah's largest alternative pain treatment center, KindlyMD prioritizes holistic pain management and often recommends medical cannabis to improve patient health outcomes.

In response to the ongoing opioid crisis, which saw over 80,000 opioid-related deaths in 2021, KindlyMD offers comprehensive care plans to ensure the safe use of opioids when necessary, including appropriate dosing and weaning plans. The company also educates patients on medical cannabis as an alternative treatment option, having conducted over 60,000 patient visits to date.

Last month, KindlyMD successfully completed its initial public offering, raising approximately $6.8 million. This milestone demonstrates strong investor confidence in the company's comprehensive approach to healthcare.

KDLY announced in June that it had become the first alternative medical treatment company in Utah to sign contracts with the state's top insurance payors, including Select Health, Medicare, and Medicaid. This credentialing allows nearly 70% of Utah's population to access KindlyMD's services through their insurance plans. Tim Pickett, PA-C, founder and CEO, stated, "This is a major milestone for KindlyMD. Now, the scope of services we provide at our Company-branded clinics, including behavioral healthcare and medical interventions incorporating alternative medicine, are covered by and reimbursable by the largest insurance providers across the state."

On June 10, KDLY announced a collaboration with Curaleaf Holdings, Inc., (OTCQX: CURLF) to expand patient education on medical cannabis in Utah. This partnership includes community care events throughout the summer, aiming to enhance patient understanding of holistic pain management. Pickett noted, "Our collaboration with Curaleaf will provide more patients with access to pain management treatment options and alternative therapies, including medical cannabis care in the state of Utah."

Additionally, KindlyMD further strengthened its position by contracting with Blue Cross Blue Shield, increasing its statewide insurance coverage to nearly 80%. Pickett commented, "The addition of Blue Cross Blue Shield under Utah's leading insurance payors reflects our commitment to transforming healthcare and making a meaningful difference in people's lives."

As the cannabis industry continues to gain momentum, KDLY stands out for its unique approach to integrating medical cannabis into comprehensive pain management and behavioral health plans. This strong foundation, coupled with the company’s expanding insurance coverage and successful partnerships, positions KindlyMD for potential growth. For investors looking to tap into the burgeoning cannabis market, KDLY presents a compelling opportunity.

Tilray Brands, Inc. (NASDAQ: TLRY) is a global leader in medical cannabis, dedicated to improving patient lives through a diverse portfolio of brands including Tilray, Aphria, Broken Coast, Symbios, and Navcora. From its origins as a licensed producer in Canada, Tilray has expanded its operations to Europe, establishing GMP-certified production facilities in Portugal and Germany. Today, Tilray Medical is a major supplier of medical cannabis across 20 countries and five continents, serving patients, healthcare professionals, and governments.

Recently, Tilray announced it will release its financial results for the fourth quarter and full fiscal year ended May 31, 2024, on July 29, 2024, at market close. Despite recent fluctuations in share price, Tilray remains a formidable player in the cannabis industry, demonstrating long-term strength through its expanding craft beer business. Acquiring brands from Anheuser-Busch in 2023, Tilray has doubled its alcohol sales, diversifying its revenue streams and enhancing its position in a competitive market.

TLRY’s strategic investments include building a $250 million cash reserve to support future acquisitions and operational expansion. This move, while diluting shares, positions Tilray advantageously for growth in the evolving cannabis sector. The company holds the top market share in Canada and Germany and distributes medical cannabis globally.

In its Q3 2024 report, TLRY reported revenue of $188.3 million, a 30% increase from the previous year, although it fell short of the $198.3 million analysts' expectations. The company significantly reduced its loss to $82.1 million from $1.2 billion a year ago. With notable hedge fund interest and a robust portfolio, TLRY is well-positioned to benefit from potential federal legalization of medical cannabis in the U.S. Irwin Simon, CEO, highlighted Tilray's readiness to capitalize on regulatory changes, particularly the potential rescheduling of cannabis to Schedule III, which would facilitate the sale of pharmaceutical-grade products in the U.S.

Canopy Growth Corporation (NASDAQ: CGC) is a global leader in the cannabis industry, committed to enhancing lives through innovative products and a diverse brand portfolio. With notable brands like Doja, 7ACRES, Tweed, and Deep Space, as well as vaporizer technology from Storz & Bickel, Canopy Growth stands out for its dedication to premium and mainstream cannabis products.

The company recently reported its financial results for the fourth quarter and fiscal year ended March 31, 2024. For Q4 FY2024, Canopy Growth achieved a 7% increase in net revenue year-over-year, or 16% excluding divested businesses. This growth was significantly driven by a 43% revenue increase from Storz & Bickel, reflecting strong sales of the new Venty portable vaporizer. The Canadian cannabis sector saw a 16% rise in medical cannabis revenue, contributing to a 4% increase in overall Canadian cannabis revenue.

In fiscal year 2024, Canopy Growth made impressive strides in reducing costs. The total cost of goods sold (COGS) decreased by 45%, with Canadian cannabis COGS dropping 54% year-over-year. Consolidated gross margins improved to 27%, marking a significant 4,600 basis point increase from the previous year. Despite an operating loss of $229 million and an adjusted EBITDA loss of $59 million, Canopy Growth showed a 72% improvement in adjusted EBITDA loss compared to FY2023.

The company's financial stability is also notable, with $203 million in cash, cash equivalents, and short-term investments as of March 31, 2024. Strengthening balance sheet actions have positioned Canopy with no material debt obligations until March 2026.

David Klein, CEO of Canopy Growth, highlighted the company’s strong foundation for future growth, emphasizing its momentum in the global cannabis markets and its readiness to capitalize on regulatory advancements in Germany and the U.S. As Canopy Growth enters FY2025, its broad portfolio of impactful brands and expanding U.S. ecosystem set the stage for continued success.

Aurora Cannabis Inc. (NASDAQ: ACB), headquartered in Edmonton, Alberta, is a leading global player in the cannabis industry, serving medical and recreational markets across Canada, Europe, Australia, and South America. The company has built a diverse portfolio of cannabis brands, including Aurora Drift, San Rafael '71, Daily Special, Tasty's, and Greybeard for adult use, and MedReleaf, CanniMed, Aurora, and Whistler Medical Marijuana Co. for medical purposes. Additionally, Aurora's international brands include Pedanios, Bidiol, IndiMed, and CraftPlant.

Aurora's strategic focus on innovation and high-quality products has positioned it as a significant force in the global cannabis market. The company recently reported its financial results for the fiscal year 2024, highlighting substantial improvements and operational efficiency.

For Q4 2024, Aurora Cannabis achieved a 5% year-over-year increase in total net revenue, reaching $67.4 million. The global medical cannabis sector drove this growth, with net revenue rising 20% to $45.6 million. The company's strong performance in medical cannabis was bolstered by the acquisition of MedReleaf Australia and increased sales in Poland and the UK. Aurora's record annual adjusted EBITDA of $12.8 million marks its sixth consecutive quarter of positive adjusted EBITDA, reflecting the company's effective cost management and revenue growth.

Aurora ended the fiscal year with approximately $180 million in cash and is debt-free in its cannabis business. The company remains focused on achieving positive free cash flow by the end of 2024. According to CEO Miguel Martin, Aurora's leadership in the global medical cannabis market is distinguished by its ability to meet diverse patient needs worldwide, underscored by a significant increase in its quarterly adjusted gross margin to 66%.

With a solid financial foundation and a robust global presence, Aurora Cannabis is well-positioned for continued growth and success in the evolving cannabis industry.

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