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Top Marijuana Stocks on the Nasdaq for October 2022

The marijuana industry consists of companies directly related to the research, development, and distribution of cannabis products, as well as companies that indirectly support these operations. Traditional stock market indices such as the Nasdaq continue to include more companies from the marijuana industry, as a growing number of regions around the world legalize marijuana. A total of 37 U.S. states now permit the use of marijuana in some form.

Nasdaq-listed marijuana companies include Tilray Brands Inc., Organigram Holdings Inc., and GrowGeneration Corp. Many of these companies managed to maintain fast revenue growth in spite of the massive disruptions caused by the COVID-19 pandemic and its aftermath.

Marijuana stocks, as represented by the ETFMG Alternative Harvest ETF (MJ), an exchange-traded fund, have significantly underperformed the broader market. MJ has provided a total return of -65.7% over the past 12 months, well belowthe benchmark Russell 1000 Index’s total return of-15.1%. These performance figures and all statistics in the tables below are as of Sept. 28, 2022.

Here are the top three marijuana stocks on the Nasdaq with the best value, fastest growth, and best performance.

Best Value Marijuana Stocks on the Nasdaq

These are the marijuana stocks trading on the Nasdaq exchange with the lowest 12-month trailing price-to-sales (P/S) ratio. For companies in the early stages of development or industries suffering from major shocks, this can be substituted as a rough measure of a business’s value. A business with higher sales eventually could produce more profit when it achieves (or returns to) profitability. The P/S ratio shows how much you’re paying for the stock for each dollar of sales generated.

Best Value Marijuana Stocks on the Nasdaq
 
Price ($)
Market Capitalization (Market Cap) ($B)
12-Month Trailing P/S Ratio
Aurora Cannabis Inc. (ACB)
1.30
0.4
1.6
SNDL Inc. (SNDL)
2.37
0.6
2.3
Tilray Brands Inc. (TLRY)
3.01
1.8
2.3

Source: YCharts

Aurora Cannabis Inc.: Aurora Cannabis is a Canada-based cannabis company serving both the medical and recreational-use markets. Its brands include Aurora Drift, Daily Special, MedReleaf, and CanniMed. Aurora’s reported year-end and financial Q4 results on Sept. 20 for the period ending June 30. Its net loss widened sharply year-over-year (YOY) as a result of a non-cash impairment charge of more than $505 million. Net revenue declined modestly YOY. The company announced that FY 2023 would be comprised of only three reporting periods, instead of the traditional four. The new fiscal year end will be March 31, 2023.SNDL Inc.: SNDL is a Canada-based cannabis producer. The company operates cultivation and processing facilities, retail stores, and sells alcoholic beverages. At its annual and special shareholder meeting in late July, the company officially changed its name from Sundial Growers Inc. to SNDL Inc. It also implemented a share consolidation under which 10 pre-consolidation common shares were consolidated into one post-consolidation common share, effective July 25.Tilray Brands Inc.: Tilray is a cannabis and consumer packaged goods company. It cultivates, produces, distributes, and sells medical and recreational-use cannabis products. It also operates wellness and beverage alcohol businesses. On Sept. 22, the company announced that an Italian unit of Tilray received approval from regulators in Italy to import and distribute Tilray’s medical cannabis oral solution, called THC25. Tilray’s Italian operations have built up a pharmaceutical network to distribute the medical cannabis oral solution, which is often prescribed by doctors to relieve acute pain or high stress. Tilray will announced earnings results for its Q1 FY 2023, ended Aug. 31, on Oct. 7, 2022.

Fastest Growing Marijuana Stocks on the Nasdaq

These are the marijuana stocks on the Nasdaq with the highest YOY sales growth for the most recent quarter. Rising sales can help investors identify companies that are able to grow revenue organically or through other means, as well as find growing companies that have not yet reached profitability. In addition, earnings per share (EPS) can be significantly influenced by accounting factors that may not reflect the overall strength of the business. However, sales growth can also be potentially misleading about the strength of a business, because growing sales on money-losing businesses can be harmful if the company has no plan to reach profitability.

Fastest Growing Marijuana Stocks on the Nasdaq
 
Price ($)
Market Cap ($B)
Revenue Growth (%)
SNDL Inc. (SNDL)
2.37
0.6
2,250
Cronos Group Inc. (CRON)
3.09
1.2
47.6
Tilray Brands Inc. (TLRY)
3.01
1.8
7.8

Source: YCharts

SNDL Inc.: See above for company description.Cronos Group Inc.: Cronos Group is a Canada-based cannabis company. Its brand portfolio includes Spinach, Happy Dance, and PEACE+. Cronos announced Q2 2022 earnings results on Aug. 9. Its net loss narrowed dramatically YOY on solid revenue growth. Revenue for the company’s U.S. business declined sharply, but international revenue, especially in the company’s Israel business, grew at a rapid pace.Tilray Brands Inc.: See above for company description.

Marijuana Stocks on the Nasdaq With the Best Performance

These are the marijuana stocks that had the smallest declines in total return over the past 12 months out of the companies we looked at.

Marijuana Stocks on the Nasdaq With the Best Performance
 
Price ($)
Market Cap ($B)
12-Month Trailing Total Return (%)
Cronos Group Inc. (CRON)
3.09
1.2
-45.3
SNDL Inc. (SNDL)
2.37
0.6
-65.5
Tilray Brands Inc. (TLRY)
3.01
1.8
-74.1
Russell 1000
N/A
N/A
-15.1
ETFMG Alternative Harvest ETF (MJ)
N/A
N/A
-65.7

Source: YCharts

Cronos Group Inc.: See above for company description.SNDL Inc.: See above for company description.Tilray Brands Inc.: See above for company description.

Advantages of Investing in Marijuana Stocks

Growing Industry: Investing in marijuana stocks exposes investors to a budding industry with untapped potential. Cannabis business research site MJBizDaily projects pot retail sales in the United States to increase from $33 billion in 2022 to over $50 billion by 2026. Furthermore, growing merger and acquisition (M&A) transactions in the space offer shareholders the potential for some exciting buyouts. According to cannabis-sector advisory firm Viridian Capital Advisors, $8.5 billion worth of M&A industry deals closed in 2021 as of mid-November that year, significantly up from around $3 billion in 2020.  

Expected U.S. Decriminalization: Despite 77% of the U.S. population living in a state with some form of legalized cannabis, its use and possession are illegal at the federal level. However, that may be about to change. In July, Senate Democrats revealed their long-awaited marijuana legalization proposal, the Cannabis Administration and Opportunity Act—legislation that would lift federal prohibitions on marijuana more than 50 years after lawmakers made the drug illegal. Although it’s unclear if the bill will gain bipartisan support, it makes the drug’s legalization one step closer, which would be a big win for Nasdaq-listed marijuana stocks.

Risks of Investing in Marijuana Stocks

Financing: U.S. cannabis companies face challenges in gaining access to funding. Many financial institutions are reluctant to lend to industry operators due to the risk of possible prosecution under federal law. Although there is legislation currently being debated in Congress that would prevent the federal government from penalizing banks that offer financial services to the cannabis industry, it has yet to gain support in both chambers.

High Overheads: Marijuana companies in the United States face high operating costs. Application and licensing fees can be a major expense for smaller cannabis startups. For instance, Connecticut charges a $25,000 application fee, while a cultivating license in the northeastern state sets applicants back $75,000. Moreover, some states stipulate that cannabis businesses hold a certain amount of assets to obtain and maintain their operating license. Finally, companies in the sector typically have high compliance costs, such as purchasing seed-to-sale software to meet regulatory obligations.

The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. Though we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.

Article Sources
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National Conference of State Legislatures. “State Medical Cannabis Laws.”

YCharts. “Financial Data.”

Aurora Cannabis Inc. “Aurora Cannabis Announces Fiscal 2022 Fourth Quarter and Full Year Results.”

SNDL Inc. “Sundial Announces Results of its Annual and Special Meeting of Shareholders and Details of the Share Consolidation.”

Tilray. “Tilray Medical Receives Approval to Extend Market Authorization in Italy.”

Tilray Brands Inc. “Tilray Brands, Inc. to Announce First Quarter Fiscal 2023 Financial Results on October 7, 2022.”

Cronos Group Inc. “Cronos Group Reports 2022 Second Quarter Results.”

MJBizDaily. “U.S. Cannabis Retail Sales Estimates: 2015-2026.”

Kiplinger. “Investing in Cannabis: 3 Top Trends for 2022.”

Businesswire. “U.S. Cannabis Industry’s Total Economic Impact to Near $158 Billion by 2026.”

Dummies. “10 Reasons Not to Invest in Marijuana Stocks.”

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