Investing in nascent industries always carries certain risks. Alternatively, if the company is successful in gaining traction in an expanding market it can deliver exponential gains to long-term investors. One such industry is cannabis.
Consumers and investors are hopeful that within the not-too-distant future the U.S. government will decriminalize or even legalize recreational cannabis use at the federal level. If that were to occur, it would be quite bullish for marijuana stocks.
WIth that in mind, today we’re going to take a look at three cannabis stocks that Wall Street is bullish on right now.
Curaleaf Holdings (OTC: CURLF)
In the first quarter of 2021, Curaleaf reported sales of $260.4 million, an increase of 170% year over year compared to revenue of just $96.5 million in the prior year period. Sales were also higher by 13% on a sequential basis. Despite its stellar top-line growth, Curaleaf reported a net loss of $17.2 million or $0.03 share higher than its prior-year loss of $15.1 million but narrower than its Q4 of 2020 loss of $35.3 million or $0.05 per share.
Its adjusted EBITDA more than tripled to $62.6 million in Q1 and the company ended the quarter with a cash balance of $315 million, up from just $73.5 million at the end of 2020.
Curaleaf attributed its solid revenue growth to a 231% increase in retail cannabis sales that grew to $188 million. Cannabis sales gained momentum due to the opening of new stores in several states.
In Q2, Curaleaf has forecast sales between $305 million and $315 million allowing it to exit the quarter in the green in terms of net income and operating cash flows. Curaleaf confirmed that the recent approvals of adult-use cannabis in the states of New York and New Jersey will unlock new markets. It forecasts the New York market to total $5 billion in annual sales while this figure for New Jersey is forecast at $2 billion.
Analysts covering the stock have a 12-month average price target of $23.12 for Curaleaf stock which is 55% higher than its current trading price.
CV Sciences (CVSI)
A U.S.-based life sciences company, CV Sciences has two business segments which include Consumer Products and Specialty Pharmaceutical. The Consumer Products business develops, manufactures, and markets plant-based dietary supplements as well as hemp-based CBD (cannabidiol) products under the PlusCBD brand name. Comparatively, the Specialty Pharmaceutical segment develops CBD products to treat medical indications.
A micro-cap stock valued at a market cap of just $42 million, CV Sciences has lost over 65% in value since May 2020. While analysts expect sales in 2021 to decline by 11% to $21.8 million, it’s expected to rise by 42% to $31 million in 2022. It will also allow the company to narrow its loss per share from $0.22 in 2020 to $0.06 in 2022.
CV Sciences has grossly underperformed the markets in the last few years as its annual sales stood at $53.7 million in 2019. However, the pullback might make the stock attractive to contrarian investors.
Analysts have a 12-month average target price of $0.62 for CV Sciences which is 58% above its current trading price.
KushCo Holdings (KSHB)
Another beaten-down cannabis company on my list is KushCo Holdings, a stock that is down 52% in the last five years. KushCo markets and sells packaging products, vapes, solvents, and accessories to customers part of the medical and adult recreational cannabis and hemp-based CBD industries. The company offers hemp trading and retail services as well to businesses in the U.S. and Canada.
In the fiscal second quarter of 2021, KushCo sales rose 9% year over year and 23% sequentially to $33 million. The increase in sales was driven by its top customers that include multi-state cannabis operators and licensed producers. KushCo also managed to secure a long-term supply contract with a large West Coast operator in Q2.
KushCo’s sales in fiscal 2020 fell to $113.8 from $149 million in 2019. Analysts expect sales to increase by 22% to $139 million in 2021 and by 51% to $210 million in 2022. This robust growth will help KushCo to improve its loss per share from $0.68 in 2020 to $0.11 in 2021.
Analysts tracking the stock have a 12-month average price target of $1.50 which is 56% above its current trading price.
All the three cannabis stocks on the list have massive upside potential according to Wall Street analysts. However, I believe Curaleaf remains the top bet here given its billion-dollar valuation, rising profit margins, and increasing top-line growth.