Top Cannabis Stocks for May 2023

Top cannabis stocks in May include SNDL Inc., TerrAscend Corp., and Curaleaf Holdings Inc., which together lead the industry in revenue growth even as a crowded field of competitors and a thriving illicit market hamper sales.

The ETFMG Alternative Harvest ETF (MJ), a proxy for cannabis stock performance, slid 53% in the last year, and even the best-performing weed stock dropped 28% in the same period, compared with a 3% increase in the large-capitalization Russell 1000 Index.

Cannabis sales across the U.S. have slowed since an early-pandemic boom, contributing to oversupply and forcing retailers to cut prices. Licensed retailers also face competition from the illegal market and must navigate the patchwork of laws restricting cannabis use across the U.S.

We look in more detail below at the top cannabis stocks in three categories: best value, fastest growth, and best stock performance. Benchmark performance data above is as of May 9, while all figures below are as of May 7, 2023.

Best Value Cannabis Stocks

Here are the cannabis stocks with the lowest 12-month trailing price-to-sales (P/S) ratio, a rough measure of companies in the early stages of development that could eventually produce more profit when they achieve (or return to) profit. The ratio shows how much you're paying for the stock for each dollar of sales generated.

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• Cresco Labs Inc.: This company grows, manufactures, and distributes cannabis products, operating in 10 states. Its brands include Cresco, Remedi, High Supply, Wonder Wellness Co., Mindy's, Good News, Sunnyside, and FloraCal Farms. Cresco shares have plunged more than 58% in the last year, in line with the broader cannabis industry.
• SNDL: It cultivates, processes, and sells cannabis through its own outlets and also sells alcoholic beverages. Its brands include Sundial, Top Leaf, Palmetto, and Grasslands. Revenue jumped in the latest quarter because SNDL added liquor retail revenue with its March 2022 acquisition of Alcanna.
• Trulieve Cannabis Corp.: Trulieve is a vertically integrated cannabis company with operations in several parts of the U.S. Its brands include Cultivar Collection, Muse, Roll One, Sweet Talk, and Momenta. Trulieve stock has shed more than 60% of its value in the past year.
• Curaleaf Holdings: It produces cannabis products for retail and wholesale distribution and provides similar professional services. Curaleaf's revenue for the final quarter of 2022 increased by 14% as the company opened eight new retail dispensaries.
• Canopy Growth Corp.: Canopy, a Canadian medical cannabis producer whose brands include Tweed, DOJA, Deep Space, and Ace Valley, has fallen by more than three-quarters in the last year.

Fastest-Growing Cannabis Stocks

These are the cannabis stocks with the highest year-on-year (YOY) sales growth for the most recent quarter. Rising sales can help investors identify companies that are able to increase revenue organically or through other means and find growing companies that haven't yet reached profitability. In addition, accounting factors that may not reflect the overall strength of the business can significantly influence earnings per share (EPS). However, sales growth alone doesn't guarantee a strong business because a company must also control costs.

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• SNDL: See company description above.
• TerrAscend: It's a vertically integrated cannabis company that operates in the U.S. and Canada, with brands including The Apothecarium, Ilera Healthcare, and Kind Tree.
• Curaleaf Holdings: See company description above.
• Verano Holdings Corp.: This is a multistate retail distributor of cannabis-related products under the brands Encore, Avexia, and MUV. Verano's revenue grew in the latest quarter as a result of strong adult-use sales in New Jersey and retail contributions from Florida store openings.
• Green Thumb Industries Inc.: This company manufactures, processes, and distributes cannabis products such as concentrates, vapes, pre-rolls, edibles, and topicals. The company also owns retail locations throughout the U.S. Its retail segment and adult-use legalization in added markets helped to drive slight revenue growth in the first three months of 2023, according to Green Thumb.

Cannabis Stocks With the Best Performance

These are the cannabis stocks that had the smallest declines in total return over the past 12 months among the companies we examined.

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• Green Thumb Industries: See company description above.
• Cronos Group Inc.: Cronos is a Canadian cannabis company that sells brands including Spinach, Lord Jones, and PEACE+. Cronos reported it increased savings in sales and marketing, general and administrative, and research and development costs.
• Tilray Brands Inc.: It cultivates, processes, and distributes cannabis for medical use with operations around the world. Tilray recently agreed to acquire fellow Canadian rival company HEXO Corp. for $229 million.
• Curaleaf Holdings: See company description above.
• TerrAscend: See company description above.

Trends to Watch in Cannabis Stocks

Marijuana stocks have given investors a wild ride over the past few years, staging both big rallies and substantial declines. Those who invest in them should monitor these key trends, as they will likely guide price direction in the months and years ahead.

Financing: Most U.S. financial institutions avoid funding cannabis companies, as marijuana is still federally illegal, meaning lenders that provide loans could face possible prosecution. However, the Secure and Fair Enforcement Banking Act (SAFE)—which passed in the U.S. House of Representatives in 2021—aimed to address this by preventing the federal government from penalizing banks that offer financial services to the cannabis industry. Although the legislation failed to gain support in the Senate, investors should monitor any future legislation that may have a similar bent.

Merger & acquisition: Merger & acquisition (M&A) transactions in the U.S. cannabis industry hit a record $10.3 billion in 2021 before dropping off to about $3 billion in 2022, reflecting the year's suboptimal market conditions. Increased dealmaking in 2023 could indicate that institutional investors have growing confidence in the cannabis industry's future.

Potential U.S. legalization: While several cannabis legalization bills are floating around the halls of Congress, bipartisan support remains difficult to achieve, creating a large amount of uncertainty for industry participants.

Advantages of Cannabis Stocks

Despite the underwhelming performance of marijuana stocks over the past year, the sector offers risk-taking investors significant growth potential. According to industry analysis firm MJBizDaily, U.S. cannabis sales are projected to surpass $33 billion in 2023 before reaching almost $57 billion by the end of 2028. Moreover, the global cannabis market is expected to reach nearly $200 billion by 2028, up from $28 billion in 2021.

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