3 Weed Stocks to Buy Before Marijuana Goes Mainstream

Two things recently happened that have investors thinking more seriously about weed stocks to buy. 

First, Uber Eats (NYSE:UBER) and cannabis information platform operator Leafly (NASDAQ:LFLY) announced they had begun partnering on cannabis delivery in Toronto, Canada’s largest city. If the Toronto experiment goes well, they may roll out cannabis delivery to other cities in Ontario. Leafly currently works with approximately 200 cannabis retailers in the Toronto area. 

The second announcement suggesting cannabis is here to stay was the news Green Thumb Industries (OTC:GTBIF) is partnering with Circle K, one of the world’s largest convenience store chains. Green Thumb will sell medical marijuana in leased space in 10 Circle K gas stations in Florida. Only Floridians with medical marijuana cards — about 700,000 people across the state — will be able to purchase weed at Circle K, but the deal is another sign the country is ready for marijuana to go mainstream. 

Here are three weed stocks to buy to ride this secular trend.     

TCNNF Trulieve Cannabis $10.90
ANCTF Alimentation Couche-Tard $43.07
TLRY Tilray $3.16

Trulieve Cannabis (TCNNF)

While Green Thumb snagged a potentially lucrative Florida retail deal, Trulieve Cannabis (OTC:TCNNF) has the larger market share for medical marijuana in the state. Trulieve has 120 medical marijuana dispensaries in Florida, more than double the next largest competitor. It also operates in 11 states.

In early October, Beacon Securities analyst Russell Stanley reiterated his “buy” rating on the stock. He estimates that Trulieve will earn $419 million Canadian in earnings before interest, taxes, depreciation and amortization (EBITDA) on revenue of $1.26 billion Canadian.  

Stanley points to Georgia becoming a significant revenue and profit generator for the company. He also notes that Trullieve is expanding in Arizona and West Virginia, where it has 20 dispensaries and eight dispensaries, respectively. And with around $190 million Candian in cash on its balance sheet, Stanley says the company has plenty of money to make an acquisition or two.

TCNNF stock is trading at 1.6x estimated 2023 sales. Aggressive investors should put Trulieve at the top of their list of weed stocks to buy. 

Alimentation Couche-Tard (ANCTF)

Alimentation Couche-Tard (OTCMKTS:ANCTF) is a convenience store operator with a retail network of more than 7,000 stores across North America, which includes Circle K. It offers investors a more conservative way to play the aforementioned Circle K deal than buying shares of Green Thumb. 

The Green Thumb deal isn’t Alimentation Couche-Tard’s only marijuana play. In September, the company announced it had partnered with Fire & Flower (OTC:FFLWF) to open a Spark Perks Cannabis Store next to a Circle K location in Brampton, Ontario. This is the first of 10 co-located stores the companies plan to open together over the next year and follows the opening of two pilot stores in Alberta in July 2020.

Couche-Tard owns more than 35% of Fire & Flower, a Toronto-based cannabis retailer and technology company that operates 92 cannabis stores across Canada. It began investing in the company in 2019 and appears serious about rolling out cannabis sales in co-branded locations in Canada, the U.S., and elsewhere. 

Over the past 10 years, Couche-Tard has grown its revenue by a compound annual rate of 11% and EBITDA at a CAGR of around 20%.

Tilray (TLRY)

Tilray (NASDAQ:TLRY) is Canada’s leading cannabis company with an 8.5% market share. The company reported mixed quarterly results in early October for its first fiscal quarter. Net revenue was basically flat from a year earlier when accounting for currency fluctuations. However, it delivered positive adjusted EBITDA for the 14th consecutive quarter. 

Tilray is expanding its cannabis business overseas and has an excellent group of non-cannabis assets owned in the U.S. including SweetWater Brewing, Breckenridge Distillery and Manitoba Harvest. The company recently partnered with Anheuser-Busch’s (NYSE:BUD) Breckenridge Brewery to produce barrel-aged beer and beer-aged whiskey under the Buddy Pass brand. It is now available across the U.S. through Southern Glazer’s Wine & Spirits, one of America’s largest alcohol distributors. Tilray’s beverage alcohol business accounts for 13% of its overall revenue, up 400 basis points from a year ago.

Tilray’s got more than enough to keep it busy until the U.S. federal government legalizes cannabis. Plus, with nearly $500 million in cash, expect to see more acquisitions. 

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.

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