Hot Picks: Cannabis stocks show upside amid sluggish market

The cannabis sector has struggled to gain momentum this year, with broad benchmarks posting modest gains as regulatory uncertainty continues to weigh on investor sentiment. Still, select stocks have significantly outperformed, driven by positioning in key U.S. states and improving fundamentals.

BNN Bloomberg spoke with Kenric Tyghe, special situations analyst at Canaccord Genuity, about cannabis stocks he believes are well positioned for potential legalization catalysts and market share gains.

Key Takeaways

• The cannabis sector continues to lag broader markets, but individual stocks are delivering strong gains by capitalizing on state-level growth opportunities.
• Adult-use legalization in key U.S. states such as Virginia, Florida and Pennsylvania remains one of the most important potential catalysts for the industry.
• Concentrated exposure to high-growth markets can outperform broader diversification in an uneven regulatory environment.
• Market maturity plays a critical role in returns, with cultivation-focused operators benefiting more in rapidly expanding retail markets.
• Ongoing banking and federal regulatory constraints remain major challenges, limiting efficiency and institutional participation across the sector.

Read the full transcript below:

ANDREW: The cannabis sector has been a laggard this year. The Global Marijuana Life Sciences Index, which aims to replicate the performance of North American cannabis stocks, is up only about five per cent so far this year. However, our guest’s top pick has outperformed the index, posting gains of more than 175 per cent. Let’s get more from Kenric Tyghe, special situations analyst at Canaccord Genuity. Kenric, thanks very much for joining us. Let’s start with Curaleaf.

KENRIC: Absolutely. Curaleaf has long been one of the darlings of the cannabis space. It has a very strong domestic footprint combined with a large international business, with significant exposure to Germany and other international markets. In the U.S., it is well positioned in key markets, including a high concentration in the Northeast.

They recently signed an agreement to purchase assets in Virginia. As a reminder, Virginia is one of the key catalyst states over the next several years, with an expected start to adult-use sales in early 2026. In that first year, Virginia is expected to generate more than US$500 million in legal sales, with a path to becoming a roughly US$1.8 billion market over time. Curaleaf remains one of the names at the forefront of discussions around the cannabis space and one we have been positive on for some time.

ANDREW: Just to remind viewers, what are the other big markets for Curaleaf?

KENRIC: Domestically, they have a presence across the majority of major legal states in the U.S. In Europe, their two largest international markets are Germany and the U.K.

ANDREW: TerrAscend is your next idea. They are also active in the U.S. What attracts you to this stock?

KENRIC: TerrAscend is a more concentrated play. The appeal is that they are not in every U.S. market, but they are in some of the highest-growth markets. Think New Jersey, Maryland, Pennsylvania and Ohio — a mix of recently legalized adult-use markets and markets that are expected to legalize adult use in the near term.

Pennsylvania is particularly important. Curaleaf, Verano and TerrAscend all have a presence there, and it is one of the key states to watch over the next couple of years. More broadly, the major catalyst states in any reasonable forecast window are Florida and Pennsylvania, on potential adult-use legalization, and Virginia, with adult-use sales expected to begin in early 2026.

ANDREW: Let’s talk about Verano Holdings. The stock had a litigation overhang.

KENRIC: That litigation overhang has now been resolved. It related to a failed acquisition from several years ago and was recently settled, which we view as a meaningful positive.

One of the more misunderstood aspects of Verano is how well represented it is in some very high-growth states. For example, it is the No. 2 operator in Florida, behind the market leader, Trulieve, yet it trades at a significant discount to peers. This is a name that has often been overlooked and one that we believe warrants closer attention.

ANDREW: Its latest results were a miss, but you believe the company is addressing the issues behind the scenes.

KENRIC: Absolutely. When you look at what drove the miss, there was nothing that caused concern or required negative revisions to our outlook or thesis. These are quality operators with quality assets in very attractive markets.

ANDREW: More broadly, do you favour retailers or producers, or a mix of both?

KENRIC: It really depends on how established or mature the market is. In a market like Maryland, where retail doors are opening very quickly, it can be more attractive to be cultivation-forward and supplying those doors rather than competing with them.

It is often easier to generate returns supplying an expanding retail base than competing directly in a crowded retail environment. Market maturity and local dynamics matter. Maryland today favours producer-forward operators, which benefits a company like TerrAscend, while other markets may reward a more balanced approach.

ANDREW: Before legalization, there were predictions the industry would follow the path of other consumer products, with major pharmaceutical or food companies entering the space. That has not really happened, aside from investments by companies like Altria.

KENRIC: Those types of investments from big pharma or big agriculture are more likely in a federally legal environment. Between now and then, rescheduling could provide increased flexibility.

We also expect growing institutional interest, including from large banks, particularly around providing more comprehensive banking services. However, the next major step — large-scale entry by big pharma or big ag — is likely still several years away and would depend on federal legalization.

ANDREW: Is banking still a major challenge for cannabis companies?

KENRIC: Banking remains a very significant problem. You have an industry that generates more than US$40 billion in retail sales that is still largely cash-based. Companies cannot accept credit cards, although that could change with rescheduling.

Operating a business of that size on a cash-only basis creates challenges, from lower average transaction sizes to cash management and security risks. It is a major operational hurdle.

ANDREW: In Canada, stores can accept debit and credit cards because cannabis is federally legal.

KENRIC: Exactly. Canada operates under a very different framework as a fully legalized recreational market. The U.S. still faces far higher constraints and barriers for operators.

ANDREW: Kenric, thanks very much for joining us.

KENRIC: Thanks, Andrew.

ANDREW: Kenric Tyghe, special situations analyst at Canaccord Genuity.

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This BNN Bloomberg summary and transcript of the Dec. 17, 2025 interview with Kenric Tyghe are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.