The 3 Most Undervalued Cannabis Stocks to Buy in March 2024
Amidst a shifting landscape, undervalued cannabis stocks are catching the eye of savvy investors. The U.S. government’s potential de-scheduling of marijuana and a Gallup survey revealing a 70% approval rate for federal-level legalization signal a notable shift in public sentiment and policy. These developments, along with the prospect of a Democratic Party win, paint a promising picture for the sector’s growth.
Moreover, the wave of state-level legalization for recreational and medical use underlines a major shift in national perception. Amplified by the Biden Administration’s pardons for simple possession, this movement primes the industry for powerful growth potential. Additionally, Reuters anticipates that states such as Hawaii and Florida are on the cusp of embracing the green revolution, broadening the market’s horizons.
This fertile ground of legislative loosening and public cheer creates a ripe moment for investing in undervalued cannabis stocks. As the Drug Enforcement Agency (DEA) contemplates reclassifying cannabis to a more lenient category, these stocks stand at the brink of a breakout.
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Curaleaf Holdings
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Curaleaf Holdings (OTCMKTS:CURLF) witnessed a 12% stock bump over the past year. The positive sentiment surrounding the stock is linked to its presence in 17 U.S. states and an ambitious leap into the European market with the acquisition of Can4Med in Poland. These strategic steps highlight the company’s determination to widen the global reach of high-quality medical cannabis.
Despite its aggressive expansion, Curaleaf reported a modest 1.5% year-on-year revenue boost to $345.3 million in the fourth quarter (Q4). Nevertheless, its financial solidity is evident with a notable 23% adjusted EBITDA margin and positive cash flows. It positions the pot stock well for future endeavors amidst potential legalization efforts.
Given these financial insights, Curaleaf Holdings clearly stands out as an undervalued powerhouse. It trades at merely 2.2 times forward sales estimates, below the sector’s median of 3.9. Moreover, TipRanks analysts’ ‘strong buy’ rating and forecasted 50% upside potential further cement Curaleaf’s status as a pivotal investment opportunity.
Innovative Industrial Properties (IIPR)
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Innovative Industrial Properties (NYSE:IIPR) has demonstrated remarkable resilience amid the cannabis market’s fluctuations. Despite plunging over 50% from its peak following the burst of the cannabis hype, the company has bounced back, defying the gloomy forecasts for its future. IIPR trades at a compelling 12 times its funds from operations (FFO). That underscores its stability and growth potential in the challenging sector.
The company’s valuation is further accentuated by its forward adjusted price-to-earnings (P/E) ratio of 16, contrasting with the sector median of 35%. This suggests a significant undervaluation, making it a noteworthy investment prospect. Combined with a forward dividend yield of 7.5% and a five-year growth rate of 43.2%, IIPR is an appealing option for investors.
This consistent performance is a testament to the company’s strategic investment and portfolio management. The marijuana stock offered an enticing capital commitment of $119.5 million in 2023 to expand its property portfolio within the cannabis industry.
Verano Holdings (VRNOF)
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Verano Holdings (OTCMKTS:VRNOF) is a vertically integrated cannabis stock offering high-quality production from seed to sale. Operating across 13 states with 14 facilities, Verano effectively meets the diverse regulatory demands of each region. It enables the company to fine-tune its offerings to resonate with local preferences. This agility underpins Verano’s competitive edge, demonstrating a remarkable blend of quality focus and expansive presence.
Verano’s forward price-to-sales ratio of 1.66 and price-to-book ratio of 1.3 dramatically diverge from the sector medians of 3.88 and 3.11, respectively. It highlights the company’s undervalued status compared to its peers. Additionally, Verano’s EBITDA growth is nothing short of stellar at 31.9%, significantly outperforming the sector median by an astonishing 450%.
Reflecting this potential, TipRanks analysts have labeled VRNOF a “moderate buy.” They have a target price of $7.57 a share, suggesting an ambitious 73% upside. This consensus indicates that Verano is not just surviving in the competitive cannabis landscape but is poised for substantial growth.
On the date of publication, Muslim Farooque 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
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.
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