The Best Cannabis Stocks for 2021—Here’s What to Buy

Cannabis stocks and green energy stocks rose in November 2020 after Joe Biden was elected the 46th U.S. president. The Biden administration's policies are expected to favor the green economy and the cannabis sector. What are the best cannabis stocks to buy for 2021?

Marijuana legalization is back on center stage after the U.S. House of Representatives passed the MORE (Marijuana Opportunity Reinvestment and Expungement) Act, decriminalizing marijuana at the federal level. In November 2020, more U.S. states decriminalized marijuana, triggering a rally in cannabis stocks.

Here are some of the best cannabis stocks for 2021. There are also penny marijuana stocks.

• Aurora Cannabis.
• Cresco Labs.
• GW Pharmaceuticals.
• Curaleaf.
• Aphria.

While Aurora's stock price more than doubled in November 2020 amid the rally in the cannabis sector, it didn't reach its 2020 high. Wall Street analysts aren't too bullish on the stock, forecasting a 30 percent downside. That said, this estimate doesn't take in the cannabis sector being rerated amid legalization by more states.

In November 2020, Aurora Cannabis raised cash by selling shares. While markets saw the move as negative, it was a smart strategy to raise cash when the stock price was high. The company expects to generate positive EBITDA in its fiscal 2021 second quarter, which could boost the stock.

While many of its peers tumbled in 2020, Cresco Labs stock outperformed the space. Cresco, one of the largest integrated cannabis companies, has operations in several states. In 2020, its acquisition of Origin House gave it a footprint in California, the largest cannabis market in the U.S.

In 2020's third quarter, the company’s revenue increased 63 percent sequentially, marking its third consecutive quarter with over 40 percent growth. Unlike most of its peers, Cresco Labs posted positive EBITDA, net income, and operating cash flow in the quarter. The stock could continue to be a winner.

GW Pharmaceuticals, a medical cannabis company, develops cannabis-derived prescription medicines with CBD-based Epidiolex, both in-house and using third-party facilities. The company is a global leader in its space, and although it has been reporting losses, they have been narrowing. Its next-12-month EV-to-revenue multiple of 5.8x looks reasonable given GW's growth outlook. 

Curaleaf produces both medicinal and recreational marijuana products. In the third quarter of 2020, its total revenue increased 195 percent year-over-year and 55 percent sequentially. Curaleaf could be among the biggest benefactors from the decriminalization of recreational marijuana in New Jersey, South Dakota, Montana, and Arizona.

Aphria’s recreational cannabis sales have been increasing. In fiscal 2021's first quarter, its adult-use cannabis sales increased 23 percent year-over-year and its net cannabis revenue more than doubled. Its cash costs are also low at $0.87 per gram of dried cannabis, and they've fallen for four consecutive quarters. While Aphria is unprofitable on the net profit level, its EBITDA are positive.

Cannabis stocks could thrive under a Biden administration next year. As more states move toward legalizing adult-use cannabis, marijuana sales are set to grow.