Three pot stocks analysts love right now (June, 2024)

Catalysts. They only matter if the stock is worth owning in the first place.

For the first stage of their existence, cannabis stocks were the domain of “hot money”. Often wildly overvalued, the only catalyst they seemingly needed was that they might be more expensive tomorrow.

Flash forward to 2024, and there has been a lot of consolidation, some going-out-of-business and finally, a lot of value. While no one was watching the remaining pot stocks became real businesses -even as their share prices declined.

On May 16, The U.S. Justice Department announced that the Attorney General had submitted a proposal to move cannabis from a Schedule One to a Schedule 3 drug.

Pot stocks since have been wild, veering this way and that, never settling. Some say another catalyst, the passing of the Safer Banking Act, will be even more monumental at unlocking value.

So where to look for value in pot stocks? We offer three that Canadian analysts love.

Green Thumb Industries

Following the company’s most recent quarterly results, Beacon Securities analyst Russell Stanley remained bullish on Green Thumb Industries (Green Thumb Industries Stock Quote, Chart, News, Analysts, Financials CSE:GTII).

On May 8, GTII reported its Q1, 2024 results. The company posted Adjusted EBITDA of $91.0-million on revenue of $276.0-million, a topline that was up 11% over the same period a year prior.

Stanley, in a research update to clients, said this quarter was a beat in all key metrics.

“Wednesday after the close, GTII reported Q1 revenue/adjusted EBITDA of $276M/$91M, beating our forecast of $265M/$75M, consensus at $269M/$81M, and approaching the street-high estimates at $280M/$92M,” he noted. “Revenue was 4% ahead of our forecast, holding relatively steady against Q4 levels despite an expected seasonal dip, and improving 11% y/y. Gross margins were 253 bps ahead of our forecast, improving 126 bps q/q and 237 bps y/y. OPEX margins were also better/lower than expected in Q1, supporting adjusted EBITDA margins that were 453 bps stronger than expected, while up 20 bps q/q and 216 bps y/y. Management reiterated its target for adjusted EBITDA margins of 30%, while also reiterating that it is less concerned with the components, implying some flexibility on gross margins.”

In a research update to clients May 9, Stanley maintained his “Buy” rating and price target of $23.00 on GTII, implying a return of 30% at the time of publication.

Trulieve Cannabis

In May, Echelon Capital Markets analyst Andrew Semple raised his price target on Trulieve Cannabis (Trulieve Cannabis Stock Quote, Chart, News, Analysts, Financials CSE:TRUL).

On May 9, TRUL reported its Q1, 2024 results. The company posted EBITDA of $85.0-million on revenue of $298.0-million, a topline that was up 4% year-over-year.

The analyst said this result is a clear positive for TRUL.

“Trulieve Cannabis Corp. reported Q124 financial results that meaningfully beat forecasts,” he wrote. “Revenue, margins, and adjusted EBITDA were all well ahead of our estimates and the consensus. This is the second consecutive quarter where Trulieve has beat our adj. EBITDA estimates by a sizable margin, as dwindling inventory liquidation activity and production from the Company’s Jefferson County automated facility account are driving strong margin improvements. The Company had significant FCF generation of $124M during the quarter ($27M excluding tax items). Trulieve ended the quarter with a massive $327M cash balance, providing it with plenty of optionality for organic or acquisitive growth ahead.”

In a research update to clients May 9, Semple maintained his “Buy” rating on TRUL but raised his target price on the stock from $15.00 to $19.00, implying a return of 20.7% at the time of publication.

Cresco Labs

In mid-May, Haywood analyst Neal Gilmer raised his price target on Cresco Labs (Cresco Labs Stock Quote, Chart, News, Analysts, Financials CSE:CL).

On May 15, CL reported its Q1. 2024 results. The company posted Adjusted EBITDA of $53-million on revenue of $184-million.

Gilmer says this was clearly a positive development.

“Cresco previously reported Q1/24 financial results that were above expectations as the margin improvement achieved in Q4 continued into the most recent quarter,” he wrote. “The operational efficiencies implemented in 2023 are clearly being reflected in the financials as the Company positions itself for adult-use conversion in Ohio and potentially Florida and Pennsylvania.”

In a research update to clients May 21, the analyst maintained his “Buy” rating on CL, but raised his price target on the stock from $3.75 to $4.00, implying a return of 35% at the time of publication.