5 Best Cannabis Stocks to Buy in October 2021

Cannabis stocks have looked weak over the last six months. Cannabis stocks rose sharply between November 2020 and January 2021 in hopes that the US would legalize adult-use marijuana at the federal level.

However, fading hope of legalization has led to a sell-off in cannabis stocks and most of them are down sharply from the peaks. Here are five of the best cannabis stocks that you can buy in October 2021.

1. Innovative Industrial Properties (NYSE: IIPR)

Innovative Industrial Properties is not a cannabis stock in the strict sense. However, the company is a good way to play the marijuana industry. IIPR is structured as a REIT and it leases land to cannabis companies. The stock is up almost 32% in the year and at current prices, its dividend yield is 2.6%.

IIPR is a dividend-paying cannabis stock

Since all of the cannabis companies are in the growth phase, and most of them are posting losses, paying dividends is out of the question for them. However, since IIPR is structured as a REIT, it has to distribute at least 90% of the income to shareholders.

Wall Street analysts are also reasonably bullish on IIPR stock and it has six buys and two hold ratings. Its median target price of $260 is a premium of 11% over current prices. The street high target price of $299 is a premium of 27.6% while the street low target price of $240 is also 2.4% above current prices.

Overall, IIPR looks like a differentiated cannabis stock. The stock gives you a proxy exposure to the cannabis cultivation industry and could be a good bet if you don’t want to expose yourself to the high volatility of cannabis stocks.

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2. Tilray (NYSE: TLRY)

Earlier this year, Tilray and Aphria merged to create a global cannabis giant. Earlier this month, it reported net revenues of $168 million in the fiscal first quarter, a year-over-year rise of 43%. During the period, its net cannabis revenues increased 38% to $70 million while net beverage revenues were $15 million in the quarter following the SweetWater acquisition. It also reaped $15 million in revenues from the Manitoba Harvest acquisition.

Tilray is a good cannabis stock for the long term

Tilray is a good cannabis stock to buy for the long term considering the massive growth that the company is forecasting. While its current revenue run rate is below $1 billion, it is targeting a revenue of $4 billion by the fiscal year 2024. The increase would come from a mix of organic and inorganic growth.

Tilray had touted millions of dollars of synergies while merging with Aphria. The company said that it has achieved actual cash savings of $20 million to date and is at a run rate of $50 million. It is on track to achieve $80 million in synergies.

The current valuations look reasonable and Tilray looks among the best cannabis stocks to buy in October 2021. The stock can deliver handsome returns over the long term for patient investors.

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3. Green Thumb Industries (OTC: GTBIF)

Green Thumb Industries stock is trading flat for the year but is down 35% from the 52-week highs. Meanwhile, it looks among the best cannabis stocks to buy in October 2021. The company has 16 manufacturing facilities and has licenses for 114 locations. Currently, the company is present in 14 US states. It has several cannabis brands as part of its portfolio.

GTBIF is a good cannabis stock with an attractive valuation

GTBIF trades an NTM (next-12 months) EV-to-sales multiple of 5.6x which looks reasonable. Analysts expect the company’s sales to rise 62.1% in 2021 and 32% in 2022. Its adjusted EBITDA is expected to rise 82% and 37% respectively over the period. Overall, the strong growth outlook and tepid valuations make GTBIF among the best cannabis stocks to buy in October 2021.

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4. Sundial Growers (NYSE: SNDL)

Sundial Growers is a penny cannabis stock. However, the company is working on aggressive growth. Sundial Growers has also been on an acquisition spree and earlier this month it acquired Alcanna for $346 million in an all-stock transaction. Sundial Growers has raised a lot of cash this year amid the Reddit mania and has been looking out for investment opportunities.

SNDL is a cannabis stock with a strong balance sheet

SNDL has ample cash on its balance sheet to fund its growth. Apart from investing in other cannabis companies, it is also lending to them at attractive terms. The company operates as a mix of a cannabis company and an investment company. If you are looking at a penny cannabis stock, SNDL should certainly be on your radar.

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5. Cronos Group (CRON)

Cronos Group is another good cannabis stock for October 2021. The stock has has fallen 30% so far in 2021 and trades at little above one-third of its 52-week highs. However, after the crash, it looks like an attractive bet.

CRON is a good cannabis stock with high growth potential

Analysts expect Cronos’ revenues to rise 50% this year. The revenue growth is expected to be 74% in 2022. However, the company is currently posting losses and is also negative on the EBITDA level. Many of the other cannabis companies are also struggling with profitability. However, as the industry consolidates, we could see the pricing get better which would support the earnings of cannabis companies.

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