We recently compiled a list of the 8 Best Pot Stocks to Buy. In this article, we are going to take a look at where SNDL Inc. (NASDAQ:SNDL) stands against the other pot stocks.
The history of the cannabis industry is riddled with changes and conflicting legislation. The international media has played an important role in shifting perspectives about marijuana and drug use. Today, we are watching the slow and steady change of mainstream opinion to consider cannabis one of the more harmless – and probably even potentially beneficial – drugs still considered largely illegal. As perspectives change, we can expect the laws to eventually follow suit.
Global Cannabis Industry:
As we mentioned in our article – 20 Cities with the Most Expensive Weed in the World – the global cannabis market was valued at $47.32 billion in 2022, and is projected to grow from $57.18 billion in 2023 to $444.34 billion by 2030, growing at a CAGR of 34% during the forecast period.
Marijuana legalization is gaining momentum around the globe, driven primarily by the increasing recognition that the product may have a range of legitimate medicinal benefits and therapeutic applications. It is the most widely cultivated, trafficked, and consumed drug worldwide.
Easing Federal Restrictions:
It was announced on the 16th of May that the US Justice Department has officially proposed a new rule that would reclassify marijuana from a ‘Schedule I’ drug, which includes heroin and LSD, to a less tightly regulated ‘Schedule III’ drug, which includes ketamine and some anabolic steroids. The decision marks a major policy shift by the federal government and while it would neither make the substance legal nor decriminalize it on a federal level, it would recognize the medical uses of cannabis and acknowledge that it has less potential for abuse than the many more harmful drugs. The change would also open more doors to conduct research on marijuana.
Another significant benefit of the reclassification is that it could add fresh arguments for supporters of ballot measures seeking to legalize cannabis in states where it is still illegal. An example of this is Florida, where voters will decide on a constitutional amendment allowing recreational weed this November.
But perhaps the ones benefiting the most from this change are cannabis companies, which after the rescheduling would no longer have to follow tax provisions under a rule called 280E, which prevents them from taking standard business tax deductions.
Although the rescheduling is far from the federal legalization that the cannabis industry is so desperately waiting for, it is a step in the right direction. As a result, several marijuana stocks and pot ETFs posted solid gains following the announcement.
Methodology:
To collect data for this article, we scanned Insider Monkey’s database of 920 hedge funds and picked the top 8 companies operating in the cannabis industry with the highest number of hedge fund investors. When two companies had the same number of hedge funds investing in them, we ranked them by the revenue of their last financial year instead.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up shot of a cannabis plant, showing its intricate details.
SNDL Inc. (NASDAQ:SNDL)
Number of Hedge Fund Holders: 7
SNDL Inc. (NASDAQ:SNDL) is the largest private-sector liquor and cannabis retailer in Canada. The company also operates as a licensed cannabis producer and stands as one of the country’s premier vertically integrated cannabis enterprises. SNDL has shown massive growth over the last few years, with its revenue skyrocketing from $60.9 million in 2020 to just over $909 million last year.
The company’s revenue during Q1 of 2024 stood at $197.75 million, a YoY increase of 3.5%, driven by cannabis retail and operations segments. Additionally, net loss notably decreased from $34.78 million in Q1 of 2023 to $2.5 million this year. The most notable improvement was in the cannabis operation segment, which delivered net revenues of $22.4 million, a 17% increase compared to Q1 2023. However, the highlight of the segment is clearly an improvement in profitability, as it posted a positive gross profit of $3.2 million against a loss of $9.5 million in the same quarter last year. Another thing to keep in mind is that SNDL had $189 million of unrestricted cash, an additional $594 million in marketable securities and investments, and no outstanding debt.
SNDL is also now positioned to fully benefit from the US cannabis markets and soon directly participate, as during the last quarter, the company announced the completion of NASDAQ’s review of its SunStream USA structure, marking a major milestone.
The stock of SNDL Inc. (NASDAQ:SNDL) was held by 7 hedge funds at the end of Q1 2024 in the Insider Monkey database, with a collective stake value of $10.5 million. SNDL is placed among the Biggest Marijuana Companies in the World.
Overall SNDL ranks 8th on our list of the best pot stocks to buy. You can visit 8 Best Pot Stocks to Buy to see the other pot stocks that are on hedge funds’ radar. While we acknowledge the potential of SNDL as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SNDL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.