According to a report by Grand View Research, the legal cannabis market is projected to reach a staggering $102.2 billion globally by 2030, which marks an annual growth rate of 25.7%. It is expected to continue even without U.S. federal support.
There is potential for a sea change in federal policy under President-Elect Donald Trump’s second administration. Trump recently endorsed state-level legalization and nominated pro-cannabis officials to important positions in his future cabinet. Robert F. Kennedy Jr. was nominated for Health and Human Services Secretary, and Matt Gaetz was briefly nominated for Attorney General. Kennedy’s nomination faces an uncertain path in the Senate confirmation process and could falter.
The rhetoric of Trump’s campaign, along with public support for marijuana banking reform, could suggest a more favorable regulatory environment in the future.
As the political landscape regarding cannabis legalization continues to evolve, two marijuana stocks appear well-positioned to capitalize on the change.
The Beaten-Down Cannabis Space Is Ready for Growth
An attractive entry point for long-term investors is Canadian cannabis titan Tilray Brands (NASDAQ: TLRY). Its stock has declined 42.8% this year. The company’s shares trade at just 1.3 times trailing sales due to a dramatic sell-off. In an ultra-high-growth industry, this is a remarkably low valuation for a market leader.
Tilray Brands has diversified its business model, expanding to craft beer and spirits. This move sets it apart from its competitors, which are pure-play, concentrating only on cannabis. Tilray Brands’ product diversity has provided stability for the company as it maintains a strong footprint in the cannabis market.
Reflecting Tilray Brands management’s smart pivot to alcohol, Wall Street analysts project the company’s revenue to increase by more than 20% over the span of the 2025 and 2026 fiscal years. The improved operational efficiency across the business resulted in the gross margin improving by over 500 basis points. The company’s latest earnings report showed a 13% year-over-year growth, scoring a record quarterly revenue of $200 million.
The company’s international expansion has also been lucrative. After the legalization of cannabis, the German medical cannabis flower revenue surged 50%.
Tilray Brands is positioned for long-term growth due to its early mover status in the European markets and diverse revenue streams. Still, it is considered a small player due to its $1.22 billion market cap. If U.S. legalization attracts major pharmaceutical and tobacco companies, it will face intense competition.
The current valuation and market position of Tilray Brand makes it an intriguing speculative play on the future of the legalization of cannabis.
Stability and Income Offered by a Cannabis REIT
Innovative Industrial Properties (NYSE: IIPR) is a real estate investment trust (REIT). The company focuses on regulated cannabis facilities and provides a more conservative way to invest in cannabis growth. Along with appreciation potential, the company offers steady rental income. In 2024, its shares have modestly increased, posting a 4.74% gain.
Innovative Industrial Properties provides significant financial flexibility due to maintaining its balance sheet with an 11% debt-to-asset ratio and no debt maturities until 2026.
With a 95.7% lease rate and a weighted average remaining lease term of 14 years, the company’s property portfolio encompasses 108 properties in 19 states. While shares trade at 17.7 times forward earnings, the metrics support the company’s 7.43% dividend yield. Reflecting a mix of property transitions and lease reclassifications, revenue dipped 1.7% year over year to $76.5 million. Adjusted funds from operations held steady at $64.3 million.
For income-focused investors seeking exposure to the cannabis industry’s growth potential, the company’s triple-net lease model and diverse tenant base provide layers of risk protection.
With discussions about potential federal reforms under a second Trump administration, companies like Innovative Industrial Properties and Tilray Brands are key players in the cannabis industry, reflecting the sector’s ongoing evolution.
