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After bursting onto the scene several years ago with considerable fanfare, much of the hype about cannabis stocks has quietly died down, and share prices have largely followed suit. Here, we’ll examine three profitable and cheap cannabis-related stocks that offer investors long-term value and potential upside: Turning Point Brands (TPB), Aurora Cannabis (ACB), and Jazz Pharmaceuticals (JAZZ).
Having been illegal for decades, cannabis is seeing the light of day following spates of deregulation across the U.S., Canada, Australia, and Europe over the past decade. Cannabis stocks, otherwise known as pot stocks, have understandably emerged to mop up the huge pent-up demand for cannabis products. Whether it be medicinal, industrial, or recreational, the cannabis market is now a commercial entity being monetized across the U.S. and Canada.
In the U.S., after an initial sentiment boost following legalization, the cannabis market has cooled. The AdvisorShares Pure US Cannabis ETF (MJUS), which tracks U.S. cannabis stocks, traded at over $50 a share in early 2021 but now trades for just $2.68. Tilray Brands (TLRY), one of the earliest and most hyped pure-play publicly traded cannabis companies, traded for over $145 a share in late 2018 but today is priced at less than a dollar. It’s hard to understate how poorly many of these pure-play cannabis stocks have performed.
Tilray (TLRY) vs. S&P 500 (SPY)
While it has been a difficult space to invest in, the industry still harbors potential — recreational marijuana is now legal in 24 U.S. states (plus Washington D.C.), while medical marijuana is legal in 39 (that said, it’s important to note that it is still classified as a Schedule 1 Drug by the Federal Government). Grand View Research predicts the global legal cannabis market will grow to $102 billion by 2030, suitable for an impressive 25.5% CAGR.
For investors still interested in the industry and gaining exposure to the space, the good news is that the sector has matured, and there are plenty of innovative ways to invest in it rather than speculating on questionable stocks with little earnings.
Turning Point Brands (TPB) is an interesting way to enter the cannabis space. While it is not a pure-play cannabis company, it sells Zig-Zag rolling papers and is part of the industry. It is also included in New Cannabis Ventures’ Global Cannabis Stock Index.
Unlike many of its peers, it has performed quite well, nearly doubling over the past year. However, unlike some of these peers, Turning Point is profitable, and even after this massive rally, it is actually reasonably cheap, trading for under 19x 2025 earnings estimates, a slight discount to the broader market.
Turning Point offers both momentum and value and has much potential going forward. In addition to rolling papers, the company sells nicotine pouches under the FRE brand. Most notably, last year, Turning Point launched a high-profile 50/50 joint venture with Tucker Carlson Media to start a new nicotine pouch brand called ALP. This move garnered significant publicity as Tucker Carlson has a significant following as one of the most popular (if polarizing) figures in U.S. media, giving ALP a large platform and high visibility. Nicotine pouches have rapidly gained popularity in recent years, with products like Zyn becoming a major hit for Philip Morris (PM). Between the popularity of nicotine pouches and Carlson’s ability to sell ALP to his audience, ALP has a lot of growth potential going forward.
I like Turning Point as a smart way to play the cannabis space because it offers strong diversification. Investors get exposure to cannabis through Zig-Zag and diversification into other revenue streams thanks to its nicotine pouch businesses.
On Wall Street, TPB earns a Strong Buy consensus rating based on three Buys, zero Holds, and zero Sell ratings assigned in the past three months. The average analyst TPB stock price target of $81.67 implies a 43% upside potential from current levels.
Aurora Cannabis was among the buzziest stocks of the initial cannabis stock boom, reaching nearly $150 a share in 2021. However, the stock has fallen precipitously since then, losing nearly 95% of its value over the past five years.
However, there are some green shoots of life here. After years of losses, the stock is up nearly 20% over the past year. The company recently reported a record adjusted EBITDA of $7 million last quarter as its pivot from focusing on the Canadian recreational market to the more lucrative and high-margin international medical market began to bear fruit. This was evidenced by revenue from the global market surging 93% and surpassing Canadian revenue for the first time.
In addition to becoming profitable, Aurora is also reasonably cheap—shares trade for a very reasonable 17.8x 2025 earnings. While this is still a speculative stock based on its spotty history, its valuation and swing to record profitability based on its strategic shift make it an intriguing speculative opportunity for risk-averse investors. Plus, sell-side analysts foresee monster upside potential ahead.
Turning to Wall Street, ACB earns a Moderate Buy consensus rating based on two Buys, one Hold, and zero Sell ratings assigned in the past three months. The average analyst ACB stock price target of $7.10 implies a 58% upside potential from current levels.
Lastly, let’s examine Jazz Pharmaceuticals ($ JAZZ) as a different way to gain exposure to the cannabis market. To be clear, Jazz Pharmaceuticals is not a pure play on cannabis as it is a diversified biotech company with an $8.5 billion market cap. However, it offers significant exposure to cannabis thanks to its 2021 acquisition of GW Pharmaceuticals, which added CBD-based epilepsy drug Epidiolex to its portfolio. The successful drug is now approaching $1 billion in annual sales and is approved in dozens of countries worldwide.
In addition to Epidiolex, Jazz’s product portfolio includes many other drugs focused on sleep disorders and oncology. I like that this gives investors diversification and additional revenue streams outside of cannabis. What’s more, shares of Jazz are pretty cheap. With analysts projecting the company to earn $23.42 per share in 2025, the stock trades for just six times 2025 earnings estimates.
Turning to Wall Street, JAZZ earns a Strong Buy consensus rating based on seventeen Buys, one Hold, and zero Sell ratings assigned in the past three months. The average analyst JAZZ stock price target of $193.82 implies a 40% upside potential from current levels.
While many cannabis stocks have developed a bad reputation after falling drastically from their lofty 2021 highs, there are pockets of value here if you know where to look. Many weaker players have gone by the wayside, while the stronger companies have matured and become more profitable. I like Turning Point Brands, Aurora Cannabis, and Jazz Pharmaceuticals as three attractive ways to play the market — all three are quite different, but what they have in common is that they are all profitable, and they all trade for inexpensive valuations. Furthermore, analysts project a significant potential upside of over 40% or more for all three over the next 12 months, highlighting their strong potential.
