3 Top Weed Stocks To Buy Now

Harvest Health & Recreation Inc. (HRVSF)

Shares in Harvest Health & Recreation have been trading higher on news that the cannabis dispenser is to be acquired by competitor Trulieve (TCNNF) in what will be the largest US cannabis takeover to date.

If the merger goes ahead, the transaction will result in the most profitable multi-state cannabis company in the country, with a combined consensus 2021 EBITDA of $461 million.

The projected deal would mean a vindication for Harvest Health’s successfully managed vertically integrated cannabis operation, and a recognition of the hard-work the company has put along the way.

For its latest earnings release, Harvest reported a 101% increase in its quarterly revenue of $88 million and an adjusted EBITDA of $26.9 million, up 196% year-on-year from $9.1 million back in Q4 2020. The company’s gross profit margin of 53.9% was also up both sequentially and year-on-year, from 44.8% and 41.0% respectively.

Harvest operates across multiple states and the business continued to expand its operations during the first quarter and further on into the year. The company made its first recreational cannabis sale in Arizona in January, and it opened a new dispensary in Pennsylvania in March as well.

As of the end of the quarter, Harvest managed 37 retail outlets in six different states, and could boast a footprint double the size of its nearest competitor, with licenses for an additional four more locations too.

The deal with Trulieve is really the only talking point in town when it comes to evaluating Harvest’s future prospects. But given that the contracts have yet to be signed and sealed, a quick look at the firm’s financial metrics wouldn’t go amiss. And, at the present, the numbers don’t look too bad; Harvest trades at a forward price-to-sales ratio of 5.18, suggesting it’s at a discount compared to the sector’s average of 7.47. 

However, all eyes will be on the acquisition in the coming months – and the closer that gets to being fulfilled, the higher Harvest’s price should trade. Getting in now prior to the final run-up could be a very smart move.

Cresco Labs Inc. (CRLBF)

Cresco Labs is the number one seller of branded cannabis products in the US.

The company has been particularly aggressive in its drive for acquisitions recently, and its purchase of Origin House in early 2020 has contributed to the firm’s Top Dog status.

As a wholesaler, Cresco is the biggest weed vendor in Illinois, California and Pennsylvania, and also operates retail businesses in those and a further four states.

2020 was an excellent year for Cresco, with the company seeing record revenue, EBITDA and operating cash flow numbers in its latest financial disclosure. 

Annual revenue was at its highest ever at $476.3 million, up 271% year-on-year, as was quarterly revenue of $162.3 million. Full year adjusted EBITDA broke more records with a total of $116.0 million, and its average per store revenue also topped out at $3.6 million.

Forward multiples are also highly favorable for Cresco as well, with EBITDA growth penciled-in at a huge 273%, and its future price-to-sales ratio predicted to be an attractive 5.61. Its year-on-year Working Capital Growth makes for an eye-watering 1,723%, and it would be remiss not to mention its EBITDA margin of 25%.

A firm with such great financial health compounds in effect when you consider that Cresco still has plenty of room to grow its business further. The company recently bought Bluma Wellness, adding to its ability to make itself a presence in Florida’s burgeoning medical cannabis space.

Helped by the cannabis industry being designated an essential business during the coronavirus pandemic, 2020 turned out to be a transformative year Cresco – both in terms of its remarkable growth, but also as confirmation that the consumer pot retailing sector presents a viable and important enterprise. If the company can maintain just a fraction of the previous year’s success, it should do OK for quite some time.

Jushi Holdings Inc. (JUSHF)

Jushi Holdings had a pretty remarkable run up in its share price during the year prior to March 2021; its value multiplied twelve times from $0.75 to just over $9.00 – but since then it has retraced to around the $6.00 mark today.

The company currently cultivates, manufactures and retails cannabis products in six states: Pennsylvania, Illinois, Virginia, California, Ohio, and Massachusetts. 

Of these, the newly sanctioned recreational cannabis market in Virginia offers Jushi a lucrative opportunity for the future, and, although the state won’t start selling weed until 2024, Jushi is well-positioned to begin preparing to capitalize off of it when it does.

It so far has a presence selling medicinal cannabis in Virginia, and the transition to consumer retail should be fairly smooth. The company’s ownership of Dalitso’s cannabis cultivation operation in the state also comes with one of only five processing permits awarded by the Virginia Board of Pharmacy – so firm already has a crucial head-start on its rivals at this early stage.

Jushi has been growing its key financial metrics well during 2020, with the company seeing sales increase by 690% to $80.8 million, and a projected sales range for this year between $205 million and $255 million. Gross profit went up a further 760% last year, and the business has been adding 560 new customers each day during the last quarter.

Most appealing for investors is that Jushi has a plethora of growth avenues it can explore in many other states. The total addressable market in recreational sales in Illinois alone is worth around $1.3 billion per year, and the firm is now expanding in California too. The momentum is there – it’s just a matter of time now until the business is fully streamlined and the profits start rolling in.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.