Investor interest in the cannabis industry is heating up again, thanks to reports that the Drug Enforcement Administration (DEA) is reviewing a recommendation to reschedule marijuana to a Schedule III drug. If the DEA does reschedule the drug, it would be a major fundamental win for cannabis companies in terms of taxation, labor, research, and more.
In particular, U.S. cannabis companies that are multi-state operators (MSOs) are primed to benefit substantially from increased federal clarity on marijuana. Many of these “pure play” cannabis stocks are priced under $5 per share and trade over the counter - which means they're somewhat more speculative and risky, but there's also substantial growth potential for investors who can stomach that risk.
Here's a look at three-low priced pot stocks that analysts expect to rally 38% or more from current levels.
Cresco Labs Stock
Chicago-based Cresco Labs (CRLBF) operates the Sunnyside dispensary chain, as well as flower, vapes, and edibles under brand names including Cresco, High Supply, and FloraCal Farms. Valued at a market cap of $546 million, the stock is down about 17% over the past 52 weeks.
Last quarter, Cresco reported adjusted EBITDA of $49 million, with revenue arriving at a stronger-than-forecast $191 million. EPS of $0.05 also beat analysts' expectations. Operating cash flow jumped to $41 million.
Analysts' recommendations for Cresco Labs are positive, with the consensus calling it a “strong buy.” Based on 9 analysts offering recommendations, 6 suggest a “strong buy,” 1 suggests a “moderate buy,” and 2 suggest a “hold.” Plus, the average price target is $3.55, implying expected upside of 120.5%.
Curaleaf Holdings Stock
Curaleaf Holdings (CURLF) is a major cultivator and distributor of cannabis via over 150 dispensaries in 19 states. With a market cap of $2.67 billion, the shares still trade below $5 each.
Over the last 52 weeks, CURLF has gained 6.3%.
CURLF missed on its latest earnings, with the loss per share of $0.09 and revenue of $333.17 million both falling short of expectations. In fiscal year 2024, Wall Street expects the company's bottom-line deficit to narrow substantially to $0.14 per share.
Analysts expect more upside for Curaleaf stock in the year ahead, with the average 12-month price target of $5.86 representing a premium of 38.5%. Based on 10 analysts offering recommendations, 7 suggest a “strong buy,” 1 suggests a “moderate buy,” and 2 suggest a “hold.”
Verano Holdings Stock
Verano Holdings (VRNOF) is another cannabis stock under $5 that's worth considering. Valued at $1.58 billion by market cap, the company operates across 13 states through dispensary locations, and also offers cannabis products under various brand names.
VRNOF stock has rallied more than 60% over the past 52 weeks, but analysts see even more upside ahead for this MSO.
Last quarter, VRNOF matched Wall Street's expectations with a loss of $0.03 per share, though revenue of $240.09 million was lighter than anticipated. Looking ahead, analysts are targeting revenue growth of 5.7% for fiscal year 2024, with losses expected to narrow to $0.08 per share for the full year.
Overall, analysts are unanimously bullish on VRNOF, with 6 recommending a “strong buy” and 2 recommending a “moderate buy.” The mean price target of $7.84 implies expected upside of about 65% from current levels.
