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3 Stocks to Benefit From the Rapid Adoption of Marijuana

·4 min read

The marijuana industry seems set to witness growth going forward on strong demand. Notably, per a report by Archview Group and BDS Analytics, the global cannabis market is estimated to reach $42.7 billion by 2024, as mentioned in a PR Newswire article. Meanwhile, the cannabis market is also poised to grow in the United States as many states continue to adopt it for both adult recreation and medical use. Notably, per a report by New Frontier Data, legal cannabis sales in the United States are estimated to grow at a CAGR of 21% and reach $41.5 billion by 2025, aided by strong consumer demand, as quoted in a GlobeNewswire article.

Moreover, the article stated that by 2025, an estimated 39% of total annual cannabis demand in the United States will be met in regulated marketplaces by legal purchases. The report added that through 2025, medical cannabis sales are estimated to grow at a CAGR of 19% while adult-use sales are expected to grow at a CAGR of 23%.

Notably, the 2020 elections saw many states across the United States, voting in favor of decriminalizing or legalizing the use of marijuana. Arizona, New Jersey and Montana chose to legalize marijuana for adult recreational use while Mississippi legalized its medical use. Meanwhile, South Dakota legalized marijuana for both recreational and medical use. This means that currently, 36 states permit the medical use of marijuana while 15 states, along with the District of Columbia, allow adult recreational use. Moreover, the “Marijuana Opportunity Reinvestment and Expungement Act” or the MORE Act was passed by the Democrat-controlled House in late 2020 along with the “Medical Marijuana Research Act” or MMJ Research Act. While the MORE Act seeks to legalize the use of marijuana at the federal level and allow for reforms and regulations, the MMJ Research Act would allow FDA approved research for medical marijuana.

In fact, Democratic senators also recently expressed their commitment to legalize cannabis this year. Senators Cory Booker (D-NJ), Ron Wyden (D-OR) and Chuck Schumer (D-NY) issued a joint statement wherein they stated their commitment to “working together to put forward and advance comprehensive cannabis reform legislation.”

3 Stocks to Watch

The marijuana industry is on fire on rapid adoption. Moreover, hopes of the government’s reforms with respect to legalizing cannabis this year in the United States also bode well for marijuana stocks. Hence, this makes it a good time to look at companies focused on marijuana that can make the most of this trend. Notably, we have selected three such stocks that carry a Zacks Rank #2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Scotts Miracle-Gro Company SMG manufactures, markets, and sells consumer lawn and garden products in the United States and internationally. The company provides nutrients, plant supplements, growing media, air filtration and lighting used for hydroponic and indoor growing to cannabis producers. It currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings increased 8.2% over the past 60 days. The company’s expected earnings growth rate for the current year is nearly 21%.

GrowGeneration Corp. GRWG, through its subsidiaries, owns and operates retail hydroponic and organic gardening stores in the United States. The company supplies hydroponic equipment to cannabis producers. It currently has a Zacks Rank #3. The Zacks Consensus Estimate for its next-year earnings increased 5.6% over the past 60 days. The company’s expected earnings growth rate for the current year is 50%.

Tilray, Inc. TLRY engages in the research, cultivation, processing,  and distribution of medical cannabis. The company is based in Canada but also operates in the United States. The company currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings improved 1.6% over the past 90 days. The company’s expected earnings growth rate for the current year is 25.3%.

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