3 Undervalued Marijuana Stocks To Buy Before They Heat Up

Here are three undervalued marijuana stocks that could gain traction in 2022

    • Pot stocks may have struggled, but the outlook for the sector is strong — boding well for undervalued marijuana stocks.
    • Curaleaf HoldingsĀ (CURLF):Ā The cannabis producer has increased its total store count to 126, up from 117 at the end of 2021.
    • Green Thumb IndustriesĀ (GTBIF): This pot company has been reporting positive net income for six quarters in a row.
    • Trulieve CannabisĀ (TCNNF):Ā The medicalĀ marijuana companyĀ has more than doubled its retail holdings, adding 58 new dispensaries during the recent quarter.

    2022 could be a decisive year for the cannabis sector and undervalued marijuana stocks that have been under pressure.

    An increasing number of Americans support the legalization of marijuana. At present,Ā about 20 states have fully legalizedĀ both medical and recreational use. At the federal level, though, itĀ remains a Schedule I substanceĀ and is illegal.

    That said, Grand View ResearchĀ estimates thatĀ the global legal marijuana market could expand at a compound annual growth rate (CAGR) of more than 25% between 2022 and 2030. So, against this backdrop, investors are focused on searching for undervalued cannabis stocks to buy before they heat up.

    Many cannabis stocks have suffered significant declines in recent months.Ā For example, theĀ AdvisorShares Pure U.S. Cannabis ETFĀ (NYSEARCA:MSOS) — one of the largest and most liquid cannabis ETF — has declined 37%Ā year-to-date (YTD).

    However, analystsĀ anticipateĀ a recovery in the cannabis industry due to improving profitability.Ā In addition,Ā expandingĀ revenue growthĀ willĀ help these companies self-financeĀ furtherĀ growth. That development would be a critical competitive advantage given that cultivators struggle to gain access to loans due to federal regulations.

    So, with that information, here are three undervalued marijuana stocks that could gain traction in 2022.

    CURLF Curaleaf Holdings $6.09
    GTBIF Green Thumb Industries $14.91
    TCNNF Trulieve Cannabis $14.84

    Curaleaf Holdings (CURLF)

    Our first marijuana stock is the Canada-basedĀ Curaleaf HoldingsĀ (OTCMKTS:CURLF). It produces and sells medicinal and recreational cannabis in 23 states within the U.S. The pot group’s strategic acquisitions of cannabis products, manufacturers, and dispensaries include Select, Curaleaf NJ, Arrow, MEOT, Remedy, Blue Kudu, and Grassroots.

    Curaleaf released Q4 results on March 3. Revenue increased 39% year-over-year (YOY) to $320 million. Meanwhile, adjusted net loss narrowed to $30 million, compared with $37 million a year ago. The companya also ended the year with $299 million in cash and $436 million in outstanding debt.

    In March 2021, the companyĀ announced the acquisitionĀ of EMMAC Life Sciences Group, Europe’s largest independent cannabis company. The acquisition offers exposure to crucial medical cannabis markets in Europe, more than twice the size of the U.S.

    Yet, CURLF stockĀ has lost more thanĀ 53%Ā of its valueĀ over the past year. Shares are also trading at 3.7 times trailing sales. Meanwhile, the 12-month median price forecast for CuraleafĀ stands at $14.10 per share.

    Green Thumb Industries (GTBIF)

    Next up isĀ Green Thumb IndustriesĀ (OTCMKTS:GTBIF),Ā whichĀ produces and sells medical and adult-use cannabis products in 15 states. Its consumer-packaged-goods strategy to offer a wide range of premium house brands has improved profit margins and branding equity.

    Green Thumb reported Q4 results on March 1. Revenue increased 37% YOY to $244 million. Net income was 10 cents per diluted share, down from 11 cents in the prior-year quarter. Furthermore, cash and equivalents ended the year at $230 million.

    The marijuana company boasts solid fundamentals, delivering positive net income for six quarters in a row. It enjoysĀ increasedĀ traffic at its 76 dispensaries andĀ is now focusing itsĀ expansion on limited license states with large populations.

    Despite positive developments, GTBIF stockĀ has dropped 33%Ā YTD. Shares are trading at 29 times forward earnings and 4 times trailing sales. At present, the 12-month median price forecast for Green ThumbĀ isĀ $37.25 per share.

    Trulieve Cannabis (TCNNF)

    Our last undervalued marijuana stock isĀ Trulieve CannabisĀ (OTCMKTS:TCNNF), a vertically integrated and fully licensed medical marijuana company. 113 of its 162 dispensaries are located in Florida.Ā Last October, the companyĀ acquired Harvest Health, which offers a significantĀ growth opportunityĀ in Arizona, Pennsylvania and Maryland.

    Moreover, Trulieve Cannabis announcedĀ Q4 resultsĀ on March 30. Revenue soared 81% YOY to $305 million. However, operating expensesĀ also surgedĀ 169% YOY. Adjusted net earnings,Ā excludingĀ charges related to the HarvestĀ HealthĀ deal, declined to 1 cent per share, down from 35 cents in the prior-year quarter. Cash and equivalents ended the period at $234 million.

    ManagementĀ is guiding forĀ $1.3-$1.4Ā billion in revenue forĀ fiscalĀ 2022, representing roughly 40% YOY growth. Its 60% gross margin stands above those achieved by most names in the industry.

    However, TCNNFĀ stock is trading at a 52-week low and has declined 43%Ā YTD. As a result, shares are trading at 23.7 times forward earnings and 2.6 times trailing sales. Finally, the 12-month median price forecast for Trulieve CannabisĀ stands at $51.49 per share.

    This article originally appeared at InvestorPlace.

    On the date of publication, Tezcan Gecgil 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 theĀ InvestorPlace.comĀ Publishing Guidelines.

    Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination.Ā