Stocks of cannabis drinks are growing as the debate over legalizing marijuana advances. A landmark bill to legalize marijuana at the federal level will be voted on by the House Judiciary Committee.
Last week, the House passed a $ 768 billion defense spending bill that includes an amendment protecting banks that provide services to legal cannabis companies in the state from the wrath of federal lawsuits.
With Democrats now controlling all three branches of government, cannabis reform is more likely to pass, leading to a dramatic increase in the stock prices of major cannabis stocks.
The top three cannabis ETFs—Seymour Cannabis Amplifier ETF (NYSEARCA:CNBS), AdvisorShares Pure Cannabis ETF (NYSEARCA:YOLO) and Cannabis ETFs (NYSEARCA:THCX) —Have double-digit year-over-year returns for the past year.
Given the broader positive momentum we’re seeing in the industry, it makes sense that many cannabis companies are doing so well. However, companies offering cannabis drinks will have a unique advantage over their peers, as it is the most popular technique of consuming CBD.
According to a report by Grand View Search, the global legal marijuana market is expected to reach $ 70.6 billion by 2028. Much of this huge market will be CBD drinks. That’s why you should have the following three companies on your radar:
- Tilray (NASDAQ:TLRY)
- New Age (NASDAQ:NBEV)
- HEXO Corp. (NASDAQ:HEXO)
Cannabis drink stocks: Tilray (TLRY)
Tilray finalized its merger with its counterpart Aphria in May, one of the biggest combinations in the cannabis arena.
Prior to the merger, there were concerns about Tilray’s viability as a long-term option in the cannabis space. However, Tilray 2.0 has a better chance of lasting success in the Canadian cannabis industry and its expansion abroad.
The latest publication of the results should give you heart. Net sales amounted to $ 513.1 million for the full fiscal year 2021. At the same time, net sales increased 27% to reach $ 513.1 million during period, up from $ 405.3 million in 2020.
Net income was $ 33.6 million for the fiscal fourth quarter ended May 31, comparing very favorably to a loss of $ 84.3 million in the prior year period.
Although the situation is unpredictable, there is a feeling that Tilray survived this crisis, according to Tilray executives.
Now let’s talk about the company’s cannabis infused drink business.
Anheuser-Busch InBev (NYSE:BUD), the world’s largest beer brewer by volume and revenue, has a partnership with Tilray predating the recent merger to produce cannabis-infused soft drinks.
Several products are offered under the joint venture.
In addition, Aphria bought Fresh water brewing, one of America’s largest craft breweries, before the merger. This will add to Tilray’s offerings, resulting in significant margin growth.
NewAge is known for its line of health drinks, but many may be surprised to know that it is involved in the CBD drink space as well.
In mid-2017, the Colorado-Utah-based company licensed the rights to certain Marley ready-to-drink drinks. The product has sold very well so far and the parties involved have renewed the license agreement.
Besides CBD infused drinks, NewAge is famous for producing drinks for health conscious consumers; Búcha Live Kombucha, XingTea, Coco-Libre, TeMana, ‘NHANCED and others.
Last year was not a good year for NewAge. Fundamentals have suffered from the impact of Covid-19 on North America, China, Latin America and Europe. Organic growth has stopped and cash consumption has increased.
A positive point was the ARIIX fusion, however. The combination adds a new product line and NewAge enters the Brazilian market, one of the most populous in the world. Combined revenue is expected to reach over $ 500 million.
All things considered, if you decide to invest in this one, it must be for the long term. While NewAge has a large international footprint and the outlook for margin growth is high, it will take time to recover from the woes of the pandemic.
The recent results report illustrates this fact. Net sales were $ 124 million for the most recent quarter, an increase of 98% from $ 63 million last year. Meanwhile, net income ended at $ 17.4 million, a jump of $ 26.9 million from a net loss of $ 9.6 million the year before.
After a trying year, these figures inspire confidence.
Cannabis drink stocks: HEXO Corp. (HEXO)
Canadian cannabis producer HEXO is going through tough times lately. The past year has been brutal due to supply chain issues and temporary store closures, and anyone hoping for improved sales has been bitterly disappointed so far.
Quarter after quarter, both sales and profits have disappointed this year, even as the world is more on top of the virus.
HEXO had to turn to the stock markets to finance its operations due to its anemic results. It recently raised $ 140 million from an offering of 47.46 million units. Hexo’s US-listed shares fell double digits on the move.
Given the state of play, it would not be surprising if the company is issuing shares again this year to strengthen its balance sheet.
However, his adult drink business is certainly a bright spot. Truss CBD USA, a joint venture between HEXO and Molson Coors Drink (NYSE:FAUCET), is responsible for the operation of five brands of beverages; Petite Victoire, Maison des Terpènes, Mollo, Veryvell and XMG; who are doing very well.
At the date of publication, Faizan Farooque did not hold (directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to the publication guidelines of InvestorPlace.com.
Faizan Farooque is a contributing author of InvestorPlace.com and many other financial sites. Faizan has several years of stock market analysis experience and was a former data reporter at S&P Global Market Intelligence. His passion is helping the average investor make more informed decisions about their portfolio. Faizan does not directly own the securities mentioned above.