Cannabis stocks have faced a downward trend over recent years, largely due to regulatory challenges and cash burn. However, the industry is showing signs of recovery as companies have managed to control costs, leading to improved margins. Additionally, it seems likely that regulatory obstacles will lessen in the future. With this sense of optimism, we will explore some of the most undervalued cannabis stocks to purchase in April.
It’s important to mention that the use of cannabis was recently legalized in Germany. There are also ongoing discussions about reclassifying cannabis from a Schedule I to Schedule III drug in the United States. The U.S. cannabis market is estimated to be worth $71 billion by 2030, while the European medicinal cannabis market is projected to grow at a CAGR of 22.5% through 2030.
Considering the significant potential for growth, it’s worth discussing undervalued cannabis stocks that could provide substantial returns.
Cronos (NASDAQ:CRON) stock has seen increased interest at oversold levels recently. Over the last month, CRON stock has risen by 31%. Given its cash buffer of $862 million, the company’s current market valuation of $1 billion seems significantly undervalued.
In 2023, Cronos expanded its product range in its existing markets of Israel and Canada. Simultaneously, the company entered new markets in Germany and Australia. In both these new markets, Cronos is focusing on the medicinal cannabis business.
With the recent legalization of cannabis in Germany, Cronos has the opportunity for aggressive expansion in both the medicinal and recreational sectors. Considering the company’s cash reserves, it’s also plausible that Cronos will seek to enter other European countries.
Tilray Brands (NASDAQ:TLRY) is another stock that has stabilized after a sizable correction in recent years. In the past 12 months, TLRY stock has remained steady, but a significant upward breakout is anticipated after this consolidation period.
In 2023, Tilray turned its attention towards acquisitions for diversification. The company is now the fifth largest craft beer brewer in the U.S.
Tilray’s U.S. presence also provides a strategic foundation for expanding its cannabis business in anticipation of potential federal-level legalization. In Q2 2024, Tilray reported a 31% year-on-year increase in net cannabis revenue from Canada and a 55% growth in international cannabis revenue, driven by the medicinal cannabis sector.
Curaleaf Holdings (OTCMKTS:CURLF) has proven to be one of the top-performing cannabis stocks, with an 81% increase over the last 12 months.
Curaleaf has a robust presence in the U.S., operating in 17 states. Additionally, the company is expanding its European footprint through organic growth and acquisitions.
Curaleaf holds a leading position in the UK medicinal cannabis market and has established a presence in Germany, Switzerland, Italy, Portugal, and Poland. The company reported an operating cash flow of $91 million for 2023 and an EBITDA margin of 24% for Q4 2023. With aggressive expansion plans and the introduction of new products, the EBITDA margin is expected to continue its upward trend, and cash flows are likely to increase over the next five years.
For those interested in undervalued cannabis stocks, a good starting point would be Cronos, Tilray Brands, and Curaleaf Holdings.
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