The Future of Cannabis Stocks in 2022

The global market for legal marijuana has never been bigger. It was valued at 24.6 billion USD in 2020 and is expected to increase at a compound annual growth rate (CAGR) of 14.3% from 2021 to 2028. As momentum builds for the legalization of marijuana in more states, so too will the demand for legal marijuana. 2022 is a great time to get in on the ground floor of this growing market.

There are three stocks to watch out for as these trends continue. These three are Aurora Cannabis (NYSE: ACB), Tilray (NASDAQ: TLRY) and Canopy Growth Corp (NASDAQ:CGC).

Aurora Cannabis Has Worries, But Long-Term Potential

Aurora Cannabis is a company with some struggles, but the long-term outlook for the stock looks promising, nevertheless. The company has pared down its production to be closer to the amount of product it sells. The company’s stock has a price to sales ratio of 4.99, the lowest of any of the three stocks here mentioned. This implies that it is the cheapest option.

The primary worry with Aurora Cannabis is and has always been its funding. The company has continued to dilute its shares in offering after offering in an attempt to raise capital. There was a public offering of $150 million worth of stock in November 2020, only to be followed by another one of $125 million in January. This cycle of offerings will continue until the company turns a profit or until they find a reliable funding source. These funding woes will likely continue throughout 2021. Could 2022 be the year they turn around their funding troubles?

Canopy Growth Has Solid Investment and Largest Market Share

Canopy Growth, unlike Aurora, has firm financial backing from minority investor Constellation Brands. Canopy has the largest market share in Canada and the company is well-positioned in the American market through a series of buyout deals.

The company’s losses for 3Q 2020, which were released in February 2021, were much deeper than anticipated, but revenue beat expectations. Much of the additional loss came from restructuring related to an overhaul of the company’s operations. On the earnings call, CFO Mike Less states that the company is expecting to attain positive operating cash flow in fiscal 2023 and positive free cash flow in fiscal 2024. The stock rose 11% that day as a result.

Tilray is the Largest Marijuana Company in the World After Merger with Aphria

Tilray is another Canadian company with a stake in the North American legal marijuana market. They are also focused on growth around the world. It was announced in December 2020 that Tilray and Aphria will merge to create the world’s largest marijuana company. Tilray is a full-service marijuana company and performs the cultivation, processing, distribution and marketing of cannabis and hemp products. The merger between Tilray and Aphria is expected to close in Q2 2021.

In March 2021, New Zealand’s Medical Cannabis Scheme granted the first medical cannabis product approvals for Tillray’s CDB-based product offering. By the second quarter of 2021, the company anticipates having a wider variety of medical cannabis products available.

One interesting fact about the company is that there has been some mention of Tilray and Aphria from the infamous subreddit WallStreetBets. Such interest in the stock could be beneficial for the short term but could lead to volatility.

Conclusion

None of these companies are generally expected to be profitable by 2022. But the long-term prospects for these companies are quite good and 2022 could present many dips and valleys that make these stocks good buys. The legal marijuana industry is in its infancy and its momentum and potential only continue to build.

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