2 Marijuana Stocks to Buy Heading into Q2 Earnings and Beyond

The marijuana industry is projected to grow at an annual rate of about 17% until it reaches $55.8 billion a year in 2025. The cannabis market has roughly tracked the S&P 500’s expansion in 2019. A popular ETF representing the cannabis market, called Alternative Harvest MJ, is up 13.2% YTD, while the S&P has climbed 13.6%.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Industry Outlook” data-reactid=”12″>Industry Outlook

Marijuana is not yet federally legal in the U.S., although it is many some states and Canada. Cowen estimated in an April 2018 report that the global cannabis industry rested at about $50 billion annually, including black-market channels.

With many 2020 presidential candidates supporting federal legalization, or at least easing of marijuana restrictions, it seems likely that legalization will come within the next few years. If this happens, a large portion of the black market will theoretically move to the legal market.

Cannabis is already recreationally legal in 11 states, D.C., and Canada, and a bill in Congress was recently passed by the House to prevent federal authorities from interfering with state legalizations. It is also medically legal in 33 states and D.C.

Data suggests that consumers will treat federally legalized marijuana like alcohol, as a collaborative study published by three universities showed that alcohol sales decreased by 15% where medical marijuana is legal. This is good news for the cannabis industry, because if it could imitate the $250 billion U.S. alcohol industry it will end up in a great spot.

Let’s take a look at some promising cannabis stocks reporting earnings in the next week and see how they look on the growth front.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Canopy Growth Corporation CGC” data-reactid=”18″>Canopy Growth Corporation CGC

Canopy is a cannabis company headquartered in Smith Falls, Ontario that produces a large selection of products. The company is vertically integrated and operates in every stage from growing marijuana to retail. It is currently the largest cannabis company in the world with a market cap of $11.2 billion. The stock has shot up 350% in the last 2 years but has dropped of from its highs recently.

Constellation STZ brands in August 2018 purchased 38% of Canopy for $4 billion. This gave Canopy some much-needed capital to expand and become an international company, and exposed the Corona and Modelo maker to the emerging cannabis market.

Canopy also signed a deal in April that gave the company the right to buy Acreage Holdings for $3.4 billion, contingent on the U.S. federally legalizing marijuana. This will be a huge deal for Canopy if completed, as Acreage has operations and dispensaries in many U.S. states, which would give Canopy instant access to the U.S. market. The thought being that Canopy wouldn’t have to spend time building out operations in the U.S. and risk losing market share in the process.

Canopy currently holds a Zacks Rank #3 (Hold) and very impressive growth estimates. CGC reports earnings after close on Wednesday, August 14.

Our Zacks Consensus Estimates call for year-over-year top line growth of 327.9% that would see it hit $86 million. Estimates for Q3 call for 530% gains over Q3 2018 to reach $112.46 million. Full year revenue growth is projected to surge 198% to $511.48 million, with fiscal 2020 revenue expected to hit $1.02 billion.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Tilray Inc. TLRY” data-reactid=”31″>Tilray Inc. TLRY

Tilray is a pharmaceutical and cannabis company headquartered in Toronto. It went public last July and produces and sells medical and recreational marijuana. Tilray stock is up 87.2% since its IPO, but is down YTD from its astronomical highs.

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