Top Cannabis Stocks on the Nasdaq

Cannabis companies that trade on the Nasdaq marketplace are having are having a difficult year. A leading index that tracks the industry has lost two-thirds of its value and growth is getting harder with marijuana use already legal in some form in 37 states. Several cannabis companies on the Nasdaq stand out, though, when it comes to growth, including SNDL Inc.: OrganiGram Holdings Inc., and Cronos Group Inc.

The Nasdaq has seen an increase in cannabis company listings during the past decade as more states and regions globally have legalized marijuana use. This enabled many of these companies to maintain fast revenue growth in the face of economic disruptions caused by the COVID-19 pandemic and its aftermath.

The industry's growth outlook is a focus of attention this fall as Americans cast their votes on cannabis ballot propositions across the U.S. A recent poll suggests voters in Maryland, a blue state, will overwhelmingly endorse legalization, though cannabis ballot propositions face tighter races in four red states—Arkansas, Missouri, North Dakota, and South Dakota—is less certain. 

Marijuana stocks, as represented by the ETFMG Alternative Harvest ETF (MJ), an exchange-traded fund, have fallen 62% over the past 12 months compared with the 21% drop in the Russell 1000 index'. These performance figures and all statistics in the tables below are as of Nov. 3, 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.

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• Aurora Cannabis Inc.: Aurora Cannabis is a Canadian cannabis company serving both the medical and recreational-use markets. Its brands include Aurora Drift, Daily Special, MedReleaf, and CanniMed. On Oct. 17, the company announced the launch of three proprietary cannabis strains: Electric Honeydew, Ultra Grape Kush and Organic BC White Grape OG.
• SNDL Inc.: SNDL is a Canadian 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. The company reported in early November that it had completed the acquisition of the Zenabis Business, including a 380,000-square-foot growing facility and cannabis inventory. The terms of the deal were not disclosed in the release.
• OrganiGram Holdings Inc.: Organigram Holdings is a Canadian producer of medical and recreational cannabis. Its subsidiaries include Organigram Inc., Laurentian Organic Inc., and The Edibles and Infusions Corp. For its third quarter, OrganiGram reported narrowing net losses and net revenue that nearly doubled year-over-year (YOY). Performance was driven by new product listings, increased retail sales momentum and international shipments.

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.

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• SNDL Inc.: See above for company description.
• OrganiGram Holdings Inc.: See above for company description.
  
• Cronos Group Inc.: Cronos Group is a Canadian cannabis company. Its brand portfolio includes Spinach, Happy Dance, and PEACE+. On Oct. 24, the company said it had reached final settlement agreements with the U.S. Securities and Exchange Commission and the Staff of the Ontario Securities Commission. The regulators had investigated Cronos for restatements it made of its financial statements for the first three quarters of 2019 and the second quarter of 2021.

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.

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• Cronos Group Inc.: See above for company description.
• OrganiGram Holdings Inc.: See above for company description.
• SNDL 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.

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