It’s hard to think of a more unloved—and yet promising—area of the stock market than cannabis companies.
When Canada legalized recreational cannabis back in 2018, Wall Street analysts envisioned that the US would soon follow. Big states like New York, Illinois and Ohio legalized it. Canadian growers went public on NASDAQ and became some of the hottest stocks on the planet as cannabis pushed its way into the financial and cultural mainstream. Even Coca-Cola considered partnering with a company to make CBD-infused sodas. (CBD is short for cannabidiol, a chemical derived from the cannabis plant that doesn’t produce a high but has been found to have therapeutic benefits.)
Then the pot revolution stalled. The US settled into ambiguous and conflicting policies that made it difficult for American cannabis companies to profit and expand. On a federal level, cannabis still remains an illegal Schedule I drug alongside heroin and cocaine. Most US cannabis growers and retailers can’t get bank accounts or list their stocks on major US exchanges. And to add to the industry’s misfortunes, a massive global oversupply of cannabis three years ago led to a collapse in prices. Cannabis stocks went into a tailspin and have fallen more than 80% since their high.
The good news? Top fund manager Dan Ahrens, says that there could be huge profits in the coming years for patient, aggressive investors willing to snap up cannabis stocks at dirt-cheap prices now. Here’s his reasoning…
Booming US demand. For an industry that operates in a regulatory haze, the US market for cannabis is, by far, the largest in the world. It’s expected to record $32.3 billion in legal sales this year and reach $45.8 billion by 2028
State support. Nearly half the states in the US have already legalized recreational use of cannabis. Forty states have legalized it for medicinal use, which requires a prescription from a health-care provider.
Political influence. Last year, President Trump supported an amendment in Florida to legalize cannabis for recreational use. (Florida voters, however, rejected a ballot measure in November of 2024 that would have legalized it.) He also voiced interest in reducing federal restrictions and loosening banking regulations.
Bottom Line Personal asked Ahrens what it will take for cannabis stocks to rebound and the best ones to own now…
The biggest impediment to the cannabis industry is that federal law still prohibits the use, sale, cultivation and possession of cannabis. Moving cannabis across state lines is forbidden, creating huge inefficiencies for growers. Exports to the global market are off-limits. And loans and grants from the Small Business Administration aren’t available to cannabis-related businesses.
But even small changes in regulatory, tax and banking policies would serve as major catalysts to legitimize the cannabis industry and boost cannabis company share prices. Investors should stick with profitable and high-quality stocks and keep an eye on potential reforms. Three catalysts to monitor now…
The US Department of Health and Human Services is considering lowering that classification from a Schedule I drug (no accepted medical use and high potential for abuse) to Schedule III (moderate-to-low potential for physical and psychological dependence). Currently, cannabis businesses are not allowed to offset regular business expenses such as payroll, rent and marketing, which often leaves their effective tax rate north of 70%. Simply by changing their tax status would save US cannabis companies billions of dollars.
Most banks refuse to provide crucial financial services to the cannabis industry for fear of criminal liability. Cannabis businesses can’t even accept debit-card payments. This requires cannabis companies to operate in cash, putting them at greater risk for robberies. The bipartisan bill, introduced in Congress in 2023, would protect banks that provide these services to state-sanctioned cannabis businesses.
Both NASDAQ and the New York Stock Exchange now prohibit US cannabis companies from listing and trading their shares. That often leaves US cannabis firms starved for capital and forced to trade on the less liquid over-the-counter (OTC) markets. The ban makes it difficult for giant, institutional investors to own US cannabis stocks, which weighs on the companies’ valuations. Changing cannabis to a Schedule III drug is a step that may lead to listing these companies on the US exchange, even though this is officially a separate issue.
There are two ways small investors can play cannabis investments…
US companies: US companies have access to fast-growing US markets, but they operate in a quasi-legal environment that hamstrings them. Stocks to consider now…
Cresco Labs (CRLBF) focuses on growing and processing medical-grade cannabis, The company isn’t the flashiest or most dominant in the cannabis industry—it has just 72 dispensaries in eight states such as Ohio and Pennsylvania. And the stock has struggled since a $2 billion merger with another multistate operator, Columbia Care, fell apart. But Cresco Labs management has continued to advance its locations, brands and clever product line. Example: Its Wellness division, in collaboration with James Beard Award–winning chef Mindy Segal, makes Mindy’s gummies, a type of cannabis edible that contains tetrahydrocannabinol (THC), the psychoactive ingredient in cannabis primarily responsible for its intoxicating effects. Recent share price: $0.82.*
Curaleaf Holdings (CURLF). The New York City–based cannabis producer and retailer is the largest in the US based on revenue and market capitalization. It operates 4.4 million square feet of cultivation capacity and owns 150 retail dispensaries in 18 states with large populations and limited licenses such as Florida, Illinois, Massachusetts, New Jersey, New York and Pennsylvania. Historically, Curaleaf was focused on the East Coast medical cannabis market, but it has been on an acquisition spree over the past five years, acquiring smaller producers of recreational cannabis, as well as EMMAC Life Sciences, Europe’s largest independent cannabis company. Recent share price: $1.18.
Canadian and international companies: These companies can list on major US stock exchanges like the NASDAQ, and they can export to more than 40 countries that have legalized some form of cannabis. But they can’t sell to Americans and are restricted from owning any US plant-touching operations. Plus, many Canadian cannabis firms still are recovering from a boom-and-bust caused by overexpansion and severe overproduction. Stocks to consider now…
High Tide (HITI) ranks as one of Canada’s largest cannabis retailers specializing in conventional buds, flowers and smoking accessories. Its chain of nearly 200 Canna Cabana brick-and mortar locations uses a discount-club model similar to Costco and boasts 1.72 million members. High Tide is expanding aggressively. It recently announced the acquisition of Purecan, a pharmaceutical wholesaler based in Frankfurt that imports medical cannabis into Germany, and it bought e-commerce retailer Fab Nutrition, which allows it to sell CBD products in the US. Recent share price: $2.39.
Jazz Pharmaceuticals (JAZZ) is one of the world’s largest cannabis-focused drug developers with more than $4 billion in total drug sales. Its aerosol-spray drug, Sativex, which treats muscle spasms and neuropathic pain associated with multiple sclerosis (MS), is approved in more than 25 countries, including the UK and Canada. Its FDA-approved drug in the US, Epidiolex, is a purified cannabidiol oral solution for the treatment of seizures in patients ages two and older and has about $900 million in annual sales. Jazz Pharmaceuticals, headquartered in Ireland, is not a pure-play medical cannabis business. It also makes the sleep disorder drugs Xyrem and Xywav, which account for more than 40% of its sales, as well as the cancer drug Rylaze used to treat acute lymphoblastic leukemia. Recent share price: $140.22.
SNDL (SNDL) is a Canadian conglomerate with an intriguing history. The company was a small cannabis player that nearly went bankrupt during the pandemic in 2021. Then, in a surprising twist, the stock gained viral popularity among small investors on social media. It became a meme stock, much like GameStop, and shot up in price. SNDL management took the opportunity to sell about $1 billion worth of stock at hugely elevated values and used the cash to diversify, moving the company into the Canadian wine, beer and liquor retail industry. Management also created a division called SunStream Bancorp to loan money to struggling US-based cannabis companies and, in some cases, invest in them directly to secure a share of their equity. Upshot: SNDL now produces steady cash flow, has a solid balance sheet and has a potential foothold in US markets if the federal government legalizes cannabis. Recent share price: $1.56.
Village Farms International (VFF) offers a way to get exposure to the cannabis industry with less volatility. The company has been a diversified agricultural powerhouse in Canada for more than 30 years. Its greenhouse facilities cover hundreds of acres in British Columbia and Texas, and the company generates half its revenues growing fresh produce such as tomatoes, bell peppers and cucumbers. In addition, Village Farms exports medical cannabis from Canada internationally to the UK, the Netherlands, Israel and Australia. Recent share price: $0.69.
*All performance figures are from Morningstar, Inc., as of March 3, 2025, and are current at press time. For current pricing, go to Morningstar.com. Bottom Line Personal recommendations are meant for five- and 10-year horizons—not for immediate profits.
