5 Best CBD Stocks to Buy In 2023
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Is investing in CBD stocks a good idea? If you consider buying shares of companies listed on the Nasdaq and NYSE, keep in mind that this sector is currently not in the focus of institutional buyers like hedge funds, so those stocks are not necessarily the best stocks to buy now.
In my opinion, it needs more excellent earnings seasons and announcements from companies in the Cannabis sector with massive media dominance before investments become worthwhile again. Below are my 10 favorite stocks to be well-prepared for once upside momentum kicks in.
Top 5 CBD Stocks
1. Jazz Pharmaceuticals (JAZZ)
Jazz Pharmaceuticals is a biopharmaceutical firm with its business focusing on treatments for oncology and sleeping disorders. In 2023, they had their 20. anniversary since its founding after expanding support for American Heart Association earlier in the year.
In 2022, they acquired commercial and global development rights for the IFNa molecule from Werewolf Therapeutics, Inc and for the Orexin-2 receptor agonist from Sumitomo Pharma Co. Ltd.
Despite various FDA approvals, the stock price can’t keep up the pace of other sectors and has gone sideways since 2014, ranging between $100 and $180. The company is currently not profitable, with negative earnings per share of -2.64, but plans an EPS next year of 19.23. The market capitalization is at the lower end at 8.2 billion.
2. Constellation Brands (STZ)
Constellation Brands belongs to the consumer defensive sector, focusing on beverages like wineries and distilleries. In 2017, the company invested $190 million in Canopy Growth Corp. (CGC), which first turned out to be an excellent investment, with CGC stock rocketing from $5 to $55 in just under 2 years. However, fast forward to 2023, the CGC stock is now as low as $0.40, with a loss of over 99% from its high.
Still, Constellation Brands isn’t giving up on Canopy even despite the rough results. The U.S. recreational market is valued at $25 billion, which indicates that there is still profit potential in the long run, with STZ expecting the market to double by 2026.
While the overall outcome of the investment of STZ in CGC remains questionable, it appears that the core business is growing, and the stock is currently at all-time highs at $272.9 after trading in a tight range between $210 and $250 since mid-2020. The current EPS is at -1.97, while the projected EPS next year is 13.30, with a 50.0B market cap.
3. AbbVie (ABBV)
AbbVie Inc. is a drug manufacturer listed in the healthcare sector on the New York Stock Exchange. AbbVie is a research-focus biopharmaceutical firm with over 50,000 employees and a pioneer in marijuana-based treatments, with more than 125 products, including various medications and CBD oil.
The company has a positive EPS of 4.24 and a projected next year EPS of 11.04 with a market cap of 248B. Since 2022, the price per share has gone sideways, ranging between $140 and $170.
4. Altria (MO)
Altria is another consumer defensive company but with its focus on the tobacco industry. In May 2019, Altria already acquired a 45% ownership interest in Cronos Group Inc. (CRON) and added to it with an exercisable Warrant by March 8, 2023, to increase the 52% of all Cronos common shares. Due to the decrease in the Cronos Group stock price since the first investment, the company expects to claim a $483 million capital loss for 2022.
Nonetheless, Altria sees enormous potential in the CBD market and holds on to its plans to increase its footprint in the industry with the extended acquisition of common shares of CRON. The company continuously comes up with solid earnings and a current EPS of 3.11 and the next year’s EPS of 5.21. The market capitalization is at 81.4B, and the company is listed on the NYSE.
5. ETFMG Alternative Harvest ETF (MJ)
Investing in individual stocks carries certain risks since those investments rely upon a big part of the company strategy, earnings and future growth, while exchange-traded funds can be a strategic clever alternative. Yet, the performance of an ETF also relies on the price developments and industry strength of the stocks it invests in.
80% of the Alternative Harvest ETF goes into securities of the index. The ETF price can be used as an indicator of the overall sentiment, and once upside momentum on high volume kicks in, investing in CBD stocks becomes an option again (at least short term). As of today, the price is at all-time lows at $3.07, indicating that the overall interest in CBD stocks is currently at a low level.
Conclusion
Direct investing in CBD stocks is currently at high risk. Specialized companies like Tilray Brands, Inc. (TLRY), Aurora Cannabis Inc. (ACB), and Canoy Growth Corp. (CGC) do pretty hard these days with swindling profit margins, negative earnings results and growth perspectives.
Buying stocks of companies that have some but not major footprints in the cannabis and marijuana sector seem to be the better alternative. Yet, once the momentum kicks in again, short-term investing in cannabis stocks can become a profitable investment idea again.
You can use stock analysis websites once the investment decision becomes more appearent to finnaly compare the best CBD stocks based on revenue, earnings per share and course potential.
Methodology
The stocks chosen for this article include four stocks and one ETF with tangible exposure to or investment in the cannabis industry, publically traded on the North American stock exchanges, NYSE and Nasdaq. All companies have positive EPS projections for the next year, a market cap of over 5 billion and
Risk of Buying Cannabis Stocks
While owning cannabis stock is entirely legal (other than owning physical cannabis in many countries), it has various financial risks. It is entirely unclear how the federal decisions will affect future developments, which makes it entirely unclear, how the potential of companies in the CBD sector can be projected.
Many CBD stocks lost 90% or more from their high. Only companies that have another main business perform well. That makes CBD stocks potential growth stocks, which means that investors now invest in companies with negative earnings results and questionable company outlooks in speculation of strong future growth.
Yet, if you compare the performance of CBD stocks too, for example, high market-cap stocks, you quickly see that stocks with a high market cap perform much better right now. However, once the demand rises again, a short squeeze can quickly arise, causing stock prices to double, triple or tenfold. Still, investing in CBD stocks that lost 90% of their value does not protect from further losses.
FAQs
Is CBD a Good Investment
There are more profitable investment opportunities than investing in CBD stocks right now. Legal uncertainties and low profit margins for retailers, but also manufacturers are on the lower end. The market might need to consolidate further to spread the better-led companies by the laggards.
If you look at the stock charts of CBD stocks, you will notice that some lost 90% or more of their value, and as long those companies stay below positive EPS, it’s likely better to stay away and instead invest in the leading CBD stocks once the market consolidated and first major merges and acquisitions took place.
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