The government is reconsidering how it classifies cannabis on the Drug Enforcement Agency’s schedule. The move could remove barriers that have throttled capital flows in the industry.
- Top three cannabis stocks for 2024: TLRY, IIPR, ABBV.
- An impending DEA scheduling decision may spark a pot stock rally.
- We dive into several tops plays for cannabis stocks, including direct and indirect plays.
Cannabis stocks didn’t offer investors too much in 2023 but prices stabilized from the year before when pot stocks collapsed on valuation concerns.
Valuations have now returned to earth, and the U.S. government is reconsidering how it classifies cannabis on the Drug Enforcement Agency’s schedule. The move could remove legal barriers and ease regulatory measures that have throttled capital flows in the industry. Will 2024 be the year that cannabis stocks return some green to investors, and what stocks are likely to perform well? We’ll analyze three pot stocks that have some potential this year.
1.Tilray
A well-known name among cannabis investors, Tilray (TLRY) made some exciting moves in 2023 striking a deal with Anheuser-Busch InBev (BUD) to acquire several beer brands, including Shock Top and Breckenridge Brewery brands. This opens the door to potentially making cannabis-infused alcohol products. For now, however, the company should benefit from revenue streams from those beer sales.
According to estimates from Bloomberg, Tilray’s revenue from its beverage alcohol segment is expected to grow by 92% to $182.5 million in 2024. That is about triple the 28.17% growth rate analysts expect its cannabis segment to achieve. But cannabis sales will still command the largest chunk of its revenue at an expected $282.5 million in 2024. So far, its beer brand acquisitions look smart.
2.Innovative Industrial Properties
Innovative Industrial Properties (IIPR) doesn’t sell cannabis, but it does own, lease and manage properties in the cannabis industry. Like a lot of cannabis stocks, IIPR didn’t perform well last year, but it has come off its recent lows. In December, the stock rose 23.46%, its best monthly performance since 2020.
A DEA rescheduling would benefit the company’s portfolio of real estate holdings in the cannabis sector. Bloomberg estimates put year-over-year revenue growth at 11.29% for 2023 to $307.57 million. Most of that is through rental income. The stock, unlike most cannabis stocks, also pays a dividend, with a hefty 7.65% current yield. This is an interesting stock to put in your portfolio to play the cannabis sector without having direct exposure to cannabis operations.
3.AbbVie
AbbVie (ABBV) is another indirect play on the cannabis sector. This one was recently in my best dividend stocks for 2024 article due to its impressive fundamentals and inspiring drug pipeline. While ABBV doesn’t have a cannabis product in its current pipeline, the company does hold dozens of patents.
A DEA rescheduling could inspire the company to open research into using those patents. ABBV has experience with using a synthetic form of tetrahydrocannabinol (THC) with one of its previous drugs, Marinol. That said, AbbVie might spark some interest in investors who are looking at playing the pharmaceutical side of the cannabis sector.
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
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