3 Cannabis Stocks That Will Thrive With or Without Reforms

The reclassification of marijuana as a schedule III drug continues to move closer. The DEA continues to push to reclassify marijuana as a less dangerous drug. That promises to improve the prospects of cannabis stocks. That said, there are a handful of cannabis stocks that thrive with or without reforms.

While the reforms are certainly welcome, there is a subgroup of cannabis stocks that have defied broader trends and are performing well. These companies are generally much closer to — or have already achieved — profitability. Profitability is one of the major hurdles facing the cannabis sector. Investors largely began to avoid placing their capital in cannabis firms as time has gone on. The reason is very simple: cannabis companies have bled cash and the return on investment simply has not materialized due to profitability concerns.

That is true except in a minority of cases. It is those few fundamentally strong cannabis stocks that will thrive with or without reforms.

Green Thumb Industries (GTBIF)

Green Thumb Industries (OTCMKTS:GTBIF) should be the first choice among cannabis stocks expected to thrive regardless of reforms.

The company has emerged as something of a unicorn in the cannabis space. It is the rare operator that has managed to create net profitability overall. In the first quarter the company reported $31 million in net income, an increase of 240% on a year-over-year basis.

Revenues increased 11%, reaching $276 million during the period. The company currently sells its products in states that have legalized cannabis consumption. That includes Ohio, Minnesota and Virginia. The company has proven it can profitably operate within the auspices of legalized cannabis. So, while it is doing well without greater federal reforms, it’s also logical to argue that the company will benefit from them.

The company has a large footprint in Florida with 16 dispensaries in that state alone and more than 90 overall spanning 14 states. The company’s financial reports strongly suggest it will continue to do well whether federal reforms happen tomorrow or five years from now.

Cronos Group (CRON) 

Cronos Group (NASDAQ:CRON) is another cannabis stock that I expect to perform well regardless of future reforms. The reason I believe that to be true is similar to that for Green Thumb Industries: the company is headed in the right direction financially and that should be the most important factor for any investor.

Cronos Group is expected to grow by more than 20% on a top line basis in 2024. That growth is also expected to bring the company much closer to overall profitability. As it stands now, Cronos Group is expected to produce earnings per share losses of 5 cents. That is a strong improvement over 2023 results where the company reported 19 cents per share losses. 

Cronos Group is expected to produce net income in 2025 and 2026. The company is also expected to revert back to losses for the following two years thereafter. However, during the next few years the company will have an opportunity to improve and perhaps avoid those anticipated losses beginning in 2027.

Innovative Industrial Properties (IIPR) 

Innovative Industrial Properties (NYSE:IIPR) is a bit of a different stock in the cannabis space. The company operates a specialized industrial real estate investment trust (REIT) focused on cannabis properties. 

The company’s portfolio spanned 19 states and 108 properties at the end of 2023. One of the big advantages of investing in REITs is the nearly guaranteed income in the form of dividends. While many cannabis stocks provide negative returns, Innovative Industrial Properties provides dividend income.

That dividend currently yields approximately 7%. It is well covered by funds from operations. Those funds increased by 8% on a year-over-year basis. That’s the point here:  Innovative Industrial Properties represents something of a twist on more common cannabis stocks.

One of the other major advantages in Innovative Industrial Properties is that it operates triple net leases. Such leases effectively push the burden of taxes, insurance and other fees onto tenants. The result is more money for the company and ostensibly for shareholders.

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.