The buzz around the cannabis industry is palpable, especially with Congress stirring the pot around passage of the Secure and Fair Enforcement Regulation (SAFER) Banking Act. This game-changing legislation could be a lifeline for cannabis businesses looking to do their banking, especially across state lines, without fear of running afoul of federal regulations. The banking bill is getting extra attention now because it might hitch a ride on a separate, must-pass spending bill, thanks to a push from the National Conference of State Legislatures (NCSL). The bipartisan org is suggesting that the SAFER Act be tacked onto the Federal Aviation Administration (FAA) reauthorization bill, which could speed the bill's passage.

Despite the challenges posed by federal laws, the cannabis industry is thriving, creating over 23,000 jobs in 2024 alone and raking in $28.8 billion in sales. This growth is happening despite a crowded market and stiff competition from unauthorized sellers. And if the SAFER legislation gets the green light, it could aid industry growth by facilitating funding, providing better access to capital, and boosting transparency.

Investors are keeping a close eye on multi-state operators like Verano Holdings Corp. (VRNOF) and Cresco Labs Inc. (CRLBF), which are uniquely positioned to benefit from federal clarity on cannabis funding. Market experts are already calling these stocks a “Strong Buy,” with plenty of growth in the forecast.

Cannabis Stock #1: Verano Holdings

Valued at $1.65 billion, Verano Holdings Corp. (VRNOF) is definitely making waves in the cannabis industry. As a key player with operations across several states, Chicago-based Verano does more than just cultivate and produce cannabis for both medical and recreational use; it also has a strong retail presence through its dispensary locations.

Talking about its stock performance, VRNOF has seen its fair share of volatility - but the stock has delivered a 52-week return of 77% and a YTD gain of 8.3%, outperforming the broader S&P 500 Index ($SPX) on both counts.

In its latest earnings report, released on March 15, the company reported Q4 2023 revenues of $237.19 million, surpassing analyst expectations of $233.22 million. That said, Verano has yet to achieve profitability, and the loss of $0.07 per share was wider than expected. Net cash from operating activities increased to $32 million year-over-year, while free cash flow improved to $23 million during the quarter.

Looking ahead, Verano is set to release its Q1 2024 results on May 8. Management projected a revenue decline of 5-7% for the quarter, mainly due to retail challenges in New Jersey, and analysts are targeting a loss of $0.08 per share, or $0.05 per share on an adjusted basis.

VRNOF is trading at 1.67 times projected 2025 sales, which seems reasonable given the growth potential. 

Strategically, Verano has been making some smart moves to boost its growth. The company recently expanded its retail presence by opening its 74th dispensary in Florida, MÜV Yulee, bringing its total to 137 stores nationwide. Additionally, Verano is shaking things up with its Cabbage Club, the first nationwide cannabis membership model. This innovative program offers perks like store credits, exclusive merchandise, and early access to new products, intended to drive customer engagement and loyalty.

The investment community remains optimistic about VRNOF. Analysts are recommending a “strong buy" overall, with five rating the stock a “strong buy,” while two suggest a “moderate buy.” The mean target price is set at $8.26, which suggests potential upside of 69.9% from here.

Cannabis Stock #2: Cresco Labs

Valued at $684 million, Cresco Labs Inc. (CRLBF) has really carved out a niche for itself as a heavyweight in the branded cannabis products arena. With a sharp focus on consumer-packaged goods, Verano's Chicago-based neighbor Cresco has crafted a diverse portfolio of vapes, flower, edibles, and dispensaries that resonate with a wide range of cannabis enthusiasts.

On the stock market front, CRLBF has undergone some volatility of its own, but also outperformed the broader market pretty handily. Cresco stock is up 47.5% YTD, and notched a gain of nearly 44% in the last 52 weeks.

Trading at 0.86 times expected 2025 sales, this over-the-counter cannabis stock looks like a value-priced growth name.

Financially, Cresco is burnishing its credentials. In Q4 2023, it reported revenues of $188.24 million, surpassing analysts' expectations. Plus, the multi-state operator swung to a quarterly profit - not only surpassing estimates, but marking a major milestone.  

Looking ahead, Cresco isn't expected to be profitable on a full-year basis until 2026. For its next upcoming Q1 report on May 22, Wall Street is looking for an adjusted loss of $0.03 per share. 

Moreover, Cresco is also in retail expansion mode, with the opening of a new Sunnyside dispensary in Gettysburg, Pennsylvania, bringing its total to 15 in the state and 72 nationwide. 

Analyst sentiment towards CRLBF is overwhelmingly positive, with a consensus rating of “strong buy.” Out of nine analysts, seven recommend a “strong buy,” one suggests a “moderate buy,” and one indicates a “hold.” The mean target price is set at $4.07, suggesting a potential upside of 100% from the current price.

The Bottom Line on Weed Stocks

There's a lot of excitement about what could happen if the SAFER Banking Act gets the green light - and particularly if it's able to secure an expedited passage. Multi-state operators like Verano Holdings and Cresco Labs are right in the thick of it, ready to make the most of these potential legislative shifts. 

Despite stubborn regulatory overhang, these growth stocks have already been making headway to expand on their budding brand recognition, and analysts are giving them the thumbs-up. So, if you're on the hunt for a low-priced growth investment, these cannabis stocks might be just what you're looking for.