Ahead of the Curve: Cannabis Stocks with Potential for 2024

Cannabis Market Leaders: The Must-Watch Stocks for 2024

In 2024, the cannabis sector and top marijuana stocks remain a dynamic and evolving landscape, with ancillary and Canadian cannabis stocks standing out as areas of significant interest. Ancillary companies, which provide vital services and products to the cannabis industry without directly engaging in cultivation or sales, have emerged as a robust segment. They offer a diverse range of opportunities, from technology solutions and equipment suppliers to marketing and legal services. This sector is particularly appealing because it benefits from the growth of the cannabis industry while mitigating the legal and regulatory risks directly associated with cannabis production and sales.

Canadian cannabis stocks, meanwhile, continue to draw attention due to Canada’s pioneering legal status in the cannabis market. Since legalizing cannabis for recreational use in 2018, Canada has become a hotbed for cannabis business innovation and a testing ground for regulatory frameworks. In 2024, investors are closely watching Canadian cannabis companies as they expand their global footprint, innovate in product development, and streamline operations. These companies are not only shaping the Canadian market but are also influencing cannabis trends and policies worldwide. As the global stance on cannabis continues to shift towards legalization, Canadian cannabis firms could be at the forefront of international market expansion and innovation.

[Read More] Top Canadian Marijuana Stocks In The Stocks Market Today

Top Cannabis Investments for the 2024 Horizon

1. Village Farms International, Inc. (NASDAQ: VFF)
2. SNDL Inc. (NASDAQ: SNDL)
3. High Tide Inc. (NASDAQ: HITI)

Village Farms International, Inc.

Village Farms International, Inc., a prominent agricultural company, excels in greenhouse-grown produce and cannabis. Based in Canada, it operates across North America and beyond. The company is renowned for its high-quality products and innovative cultivation methods. Its sustainable greenhouse farming distinguishes it in the industry. Village Farms produces both fresh vegetables and premium cannabis, showcasing its diverse expertise.

As of April 2023, Village Farms has notably expanded its retail footprint. Its products are widely available in various U.S. states, particularly in areas with favorable agricultural and cannabis regulations. This expansion underscores the company’s commitment to accessibility and quality. Village Farms is growing its market share through strategic expansions and partnerships, focusing on high-demand regions for its produce and cannabis products.

Third Quarter Financial Highlights

1. Consolidated Sales and Operating Loss: Village Farms’ consolidated sales in Q3 2023 slightly decreased by 2% year-over-year to $69.5 million. However, the operating loss improved remarkably, decreasing to ($2.9 million) from ($12.3 million) in the previous year. The consolidated net loss also improved to ($1.3 million), compared to ($8.7 million) previously.
2. Canadian Cannabis Segment: This segment, including Pure Sunfarms and Rose LifeScience, saw a 5% decrease in net sales to $28.8 million (C$38.7 million). Despite this, the gross margin improved to 35%, up from 27%. Net income increased to $2.9 million (C$3.8 million), with adjusted EBITDA at $4.6 million (C$6.2 million).
3. U.S. Cannabis Segment: Under Balanced Health Botanicals, net sales were steady at $5.0 million. The gross margin stood at 64%. Net income improved to $79,000, from a net loss of ($0.3 million), and adjusted EBITDA rose to $0.2 million.
4. Produce Segment (Village Farms Fresh): Sales were reported at $35.7 million. The segment’s net loss significantly improved to ($1.0 million), with an adjusted EBITDA of $0.8 million.
5. Strategic Growth and Achievements: Village Farms maintained its market share leadership in the Canadian Cannabis market. It launched successful brands and expanded product offerings, aligning with consumer preferences. The company received the title of Best Canadian Cannabis Company at the 2023 Benzinga Cannabis Awards.

Overall, Village Farms International, Inc. demonstrated improved financial performance in the third quarter of 2023. The company’s robust presence in both the cannabis and produce markets reflects its ongoing commitment to growth and innovation.

VFF Stock Performance

VFF stock closed at $0.7135 on December 20^th, down 7.34% in the last month of trading. Currently, the stock has a 52-week price range of $0.5550-$1.77 and is down 46.75% year-to-date.

[Read More] Here Are 3 Marijuana Stocks You Should Know About 2024

Sundial Growers Inc. Overview

Sundial Growers Inc., based in Calgary, Alberta, Canada, is a prominent entity in the cannabis industry. Founded in 2006, the company primarily serves the adult-use cannabis market. Their product line includes dried flower, pre-rolls, and vapes, emphasizing safety, consistency, and quality. With numerous retail outlets across Canada, Sundial has a strong presence in Alberta, British Columbia, and Ontario, key regions for their cannabis products. As of April 2023, Sundial’s growth strategy focused on strengthening and expanding within Canada, with no expansion into the U.S. or other international markets. Their commitment to quality and customer experience positions them as a significant player in the Canadian cannabis sector.

Third Quarter 2023 Financial and Operational Highlights

1. Cash Flow and Liquidity: Sundial reported a substantial increase in net cash from operating activities, reaching $27.5 million, up from $8.6 million in Q3 2022. The positive free cash flow stood at $16.5 million, a notable improvement from the previous year’s negative $67.1 million. Unrestricted cash as of September 30, 2023, increased to $202.0 million, an 8.9% sequential rise.
2. Net Revenue: The company’s net revenue for Q3 2023 was $237.6 million, a 3.1% increase from $230.5 million in Q3 2022. The liquor retail segment remained stable at $151.8 million. The cannabis retail segment grew by 14.1%, reaching $75.5 million. The cannabis operations segment saw a significant 77.4% increase, totaling $21.0 million.
3. Gross Margin and Net Loss: The gross margin decreased to $48.6 million, down by 3.4%, mainly due to non-cash inventory impairments. The net loss was $21.8 million, a 77.9% improvement from the $98.8 million loss in Q3 2022, largely attributable to previous asset impairments.
4. Adjusted EBITDA: The adjusted EBITDA for the quarter was $16.1 million, slightly lower than $18.3 million in Q3 2022.
5. SunStream Portfolio: Sundial holds five credit investments in the SunStream portfolio, following the monetization of one credit exposure in Q3 2023.

Overall, Sundial Growers Inc. demonstrated significant financial improvements in the third quarter of 2023. The company’s effective cash generation and operational efficiencies, along with a substantial increase in revenues across its cannabis and liquor segments, reflect its strong position in the market. Despite challenges in gross margin and net loss, Sundial’s strategic management and operational achievements indicate a solid trajectory in the Canadian cannabis industry.

SNDL Stock Performance

SNDL stock closed at $1.42 on December 20^th, down 4.05% in the past month of trading. The stock has a 52-week price range of $1.25-$2,48 and is down 32.06% year to date.

[Read More] 2024’s High Yield Harvest: Leading Cannabis REITs for Sustained Growth

High Tide Inc. Overview

High Tide Inc. has established itself as a notable entity in the cannabis retail sector. Founded in 2009, it specializes in cannabis retail stores and e-commerce platforms, alongside manufacturing and distributing cannabis lifestyle products. As of April 2023, High Tide operated a significant number of retail locations, particularly in Canada. They have also been expanding in the U.S., with a strong presence in states like Illinois and Pennsylvania, where the cannabis markets are growing. High Tide’s strategy focuses on expanding its retail footprint and enhancing its online presence, aiming to serve a diverse North American customer base.

Third Fiscal Quarter 2023 Financial Highlights

1. Revenue Growth: High Tide’s revenue reached $124.4 million, a 30% year-over-year increase and a 5% sequential rise. This growth highlights the company’s expanding market presence and operational efficiency.
2. Free Cash Flow: The company’s free cash flow improved significantly, turning positive at $4.1 million, compared to the negative $2.0 million in the previous quarter. This turnaround is attributed to effective cost control and the success of its discount club model.
3. Gross Profit and Margin: Gross profit increased to $34.6 million, up 34% year-over-year and 10% sequentially. The consistent gross profit margin of 28% showcases High Tide’s profitability.
4. Adjusted EBITDA: The adjusted EBITDA surged to $10.2 million, a 140% increase year-over-year and a 55% sequential rise, aided by one-time returns and cost-saving measures.
5. Operational Efficiencies: High Tide reduced its general and administrative expenses to 5.2% of revenue. The integration of Fastendr technology and the success of its Cabanalytics business data platform, which saw a 19% increase in sales to $6.5 million, contributed to operational efficiency.
6. Loyalty Program Growth: The ELITE cannabis loyalty program grew rapidly, reaching over 18,800 members.
7. Net Loss and Cash Position: Despite the positive trends, the company reported a net loss of $3.6 million, impacted by a decrease in income from the revaluation of derivative liabilities. However, High Tide’s financial health remains strong, with cash on hand totaling $25.7 million, a 40% increase from the previous year.

In summary, High Tide Inc.’s third fiscal quarter of 2023 demonstrated significant financial performance, marked by revenue growth, improved cash flow, and robust gross profit margins. The company’s strategic initiatives in cost-saving and operational efficiency are evident in its financial results, positioning it strongly in the North American cannabis retail market.

HITI Stock Performance

The shares of HITI finished at $1.53 on December 20^th, up 28.57% in the last month of trading. The stock is trading in a 52-week price range of $1.0340 to $2.30, down 0.65% year to date.

Cannabis Stocks to Keep on Your Radar for 2024

The positive financial results and strategic growth highlight the cannabis industry’s maturity in North America. Overall, the market is evolving, marked by growing legal acceptance and consumer demand. These companies are positioned to leverage emerging opportunities. Their success provides insights into the cannabis sector’s dynamics.  Looking ahead, the cannabis industry seems set for ongoing growth and innovation. Companies like Village Farms, Sundial Growers, and High Tide are at the forefront. They are shaping the future of this dynamic and evolving market and top cannabis stocks.