The momentum for marijuana legalization in the United States for personal use among adults received a solid tailwind by the COVID-19 pandemic putting a huge strain on state budgets as tax revenues dwindled as entire state economies were closed down. When one of the biggest and most populated states decides it is time to legalize pot, it is also time for investors to look at the top stocks in the industry again.
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Last Saturday, a bill to legalize adult-use cannabis was introduced following a three-way agreement being reached between Governor Cuomo, the state senate majority leader and assembly speaker. This puts New York in position to become the 17th state to legalize adult-use cannabis. In addition, the bill grandfathers in vertical integration for legacy medical cannabis operators, which top analysts see as a big win for current ones in the state.

We decided to screen our 24/7 Wall St. database looking for some of the top companies in the industry. Investors that don’t own shares are in a great position now, as many of the top stocks have backed up substantially and are offering some outstanding entry points. It is still important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Aphria

This company is very close to achieving positive cash flow. Aphria Inc. (NASDAQ: APHA) engages in the production and supply of medical cannabis.

Recently the company announced a merger with Tilray, which will make it the largest cannabis company in the world in terms of revenue. Cost savings look material. Aphria’s respected chief executive officer will lead the new company. This looks like an intriguing play for investors looking to add shares before the merger is completed.

In the all-stock merger, Aphria shareholders will receive .08381 shares of Tilray from every Aphria share they own.

Cantor Fitzgerald’s Overweight rating comes with a Wall Street high $32.50 price target. No consensus target was available. The shares closed Monday at $16.95 a share.

Canopy Growth

This is among the largest marijuana companies based on market capitalization. Canopy Growth Corp. (NYSE: CGC) engages in the production, distribution and sale of cannabis for recreational and medical purposes primarily in Canada, the United States, Germany and the United Kingdom.

The company’s products include dried cannabis flowers, oils and concentrates, and softgel capsules. It offers its products under the Tweed, Quatreau, Deep Space, Spectrum Therapeutics, First & Free, TWD, This Works, BioSteel, DNA Genetics CraftGrow, Tokyo Smoke, DOJA, Van der Pop, and Bean & Bud brands.

The company also provides growth capital and a strategic support platform that pursues investment opportunities in the global cannabis sector. Canopy Growth has a clinical research partnership with NEEKA Health Canada and NHL Alumni Association to examine the efficacy of CBD-based therapies as part of the mitigation of persistent post-concussion symptoms.

Note that beverage giant Constellation Brands is Canopy’s largest shareholder after a $4 billion investment in 2018. That could grow to over 50% ownership with the exercise of additional warrants in the coming years.

BofA Securities has a Buy rating and a massive $59.39 price target on the shares. Again, no consensus target was available. The stock closed at $31.24 on Monday.

This company had a major international conglomerate take a large position late in 2018. Cronus Group Inc. (NASDAQ: CRON) is a global cannabis company founded in 2012 and based in Ontario, Canada, with a presence across five continents. Its principal activities are the production and sale of cannabis and cannabis-derived products in federally legal jurisdictions.
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Back in December of 2018, Altria agreed to buy a 45% stake in the company for about $1.8 billion, a sign of the new world in which the tobacco company must compete. This strategic partnership provides Cronos with additional financial resources, product development and commercialization capabilities, as well as deep regulatory expertise, to better position the company to compete, scale and lead the rapidly growing global cannabis industry. This also gives Altria the option to increase to full ownership if it so chooses down the road.

Raymond James has a Buy rating and $10 price target, while an $11 price target comes with MKM Partners’ Buy rating. No consensus target was available, and Monday’s closing print was $9.16 per share.

Curleaf

This is a favored pot stock due to its large U.S. exposure, and it could have among the biggest upside potential. Curleaf shares are traded over the counter, and the company operates as an integrated medical and wellness cannabis operator in the United States. It operates in two segments.

The Cannabis Operations segment engages in the production and sale of cannabis through retail and wholesale channels. The Non-Cannabis Operations segment provides professional services, including cultivation, processing and retail know-how and back-office administration, intellectual property licensing, real estate leasing services and lending facilities to medical and adult-use cannabis licensees under management service agreements. It offers oils for vaporizing, cartridges, tinctures, capsules and ground-flower.

The company also provides hemp-based CBD products. As of March 9, 2021, it operated 101 dispensaries, 23 cultivation sites and 30 processing sites in 23 states of the United States.

Stifel’s street-high price target for the Buy-rated stock is $32.25. And again, no consensus target price. Monday’s closing share price was $14.98.

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The bottom line for investors is that since Pandora’s box for the industry has been opened, it will never be shut again. While the huge dramatic moves some of the top stocks made a few years back when Canadian legalization was at the forefront may be history, there is good reason to add some of the top stocks in the industry to aggressive growth portfolios as legalization spreads across the United States and Mexico.

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