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Buy the Dip Now: 3 Cannabis Stocks

Christopher Liew, CFA
Marijuana leaves, cannabis on a dark background, beautiful background, indoor cultivation
Marijuana leaves, cannabis on a dark background, beautiful background, indoor cultivation

The share prices of three small-cap weed stocks are falling. Village Farms (TSX:VFF)(NASDAQ:VFF), MediPharm (TSX:LABS), and Supreme Cannabis (TSX:FIRE) are the weed stocks you should buy now for overflowing gains in the future.

Top greenhouse grower

Village Farms is one of the longest longest-operating vertically integrated greenhouse growers in North America and the only publicly-listed greenhouse produce company on the TSX.

The company is creating inroads in Canada’s two provinces whose combined population composes 50% of the country’s total population. Its Pure Sunfarms struck supply agreements with British Columbia Liquor Distribution Branch (BCLDB) and Ontario Cannabis Retail Corporation (OCRC).

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Pure SunFarms is the joint venture for large-scale, low-cost, high-quality cannabis production that Village Farms own 50%. It would supply BCLDB and OCRC with PureSunfarms’ branded cannabis products for the recreational market. Discussions are ongoing with other provinces to strike more supply agreements.

Analysts are bullish about the prospects of VFF, forecasting the stock to gain at least 108%, from $14.44 to $30.07 in the next 12 months. With the industry entering a new phase amid the legalization of hemp-derived CBD, VFF’s value could even triple.

Pioneer in extraction

The allure of MediPharm as a viable weed stock would undoubtedly rise in the coming months. Many cannabis companies are preparing to compete in the lucrative derivative market. But to produce high-quality products, you need an expert to extract cannabinoids (CBD) from cannabis and hemp biomass.

MediPharm is already producing and selling pharma-grade cannabis oil and concentrates for derivative products in Australia and Canada. But it could also provide contract processing services to other licensed producers and growers of cannabis.

The annual run-rate processing capacity of this $608.5 million company 500,000 kilos but its expansion is ongoing. As MediPharm signs up more clients, the company would be awash with cash from its contracts. Profitability is 100% certain in the foreseeable future.

Analysts covering MediPharm are maintaining their buy ratings. A price below $5 is a steal for this weed stock that offers minimal risk. Among its significant clients are Canopy Growth, Cronos Group, and equally hot weed stock Supreme Cannabis.

Premium quality products

FIRE is another weed stock that carries a “strong buy” rating. In its fiscal Q4 2019 report, the company was able to finally achieve its first positive adjusted EBITDA ($3.2 million). For the quarter, FIRE’s net revenue is $19 million or a 90% increase from Q3 2019.

The company’s total revenue in fiscal 2019 is $41.8 million, which represents a remarkable 370% jump from the $8.9 million total revenue posted in fiscal 2018. Management expects total net revenue in fiscal 2020 to be around $150 million to $180 million.

FIRE is the weed stock to watch. The company aims to have the best-in-class infrastructure. With a host of top consumer brands, FIRE would make a huge impact on the international markets.

Standouts

Make no mistake. Village Farms, MediPharm, and Supreme Cannabis, would outperform and be more profitable than the larger industry peers. The weed stocks are must-haves if you want to build the safest marijuana stock portfolio.

More reading

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool owns shares of Village Farms International, Inc.

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