Riding the Marijuana Reclassification Wave: 3 Stocks to Watch in 2026

2025 shaped up to be a breakthrough year for the cannabis industry. After years of muted growth and battered stock prices, the sector finally began showing signs of life as long-awaited regulatory progress moved closer to reality.

Earlier this month, President Trump signed an executive order directing federal agencies to initiate the process of reclassifying marijuana to Schedule III of the Controlled Substances Act. This order formally acknowledged marijuana’s medical use, marking a significant shift from its long-standing Schedule I designation.

While the move does not legalize recreational cannabis, it carries meaningful implications for the industry. Most notably, it could eliminate the application of IRS Rule 280E, which currently prevents cannabis businesses from deducting most operating expenses — a change that could materially improve profitability across the industry. In addition, formal medical recognition could accelerate clinical research, broaden physician acceptance and enhance credibility among institutional investors.

Against this backdrop, we examine three companies — Cronos Group CRON, Village Farms International VFF and Tilray Brands TLRY — that look poised to capitalize on the sector’s renewed momentum. We'll analyze why each of these companies, either carrying a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), is an interesting prospect to watch.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Cronos Group

Currently sporting a Zacks Rank #1, this Canada-based cannabis operator has been broadening its international footprint. Earlier this month, Cronos Group announced an agreement to acquire CanAdelaar B.V., the largest cannabis producer in the Netherlands’ adult-use market under the country’s regulated “Wietexperiment.” This $67 million deal gives Cronos a leading position in Europe’s most advanced adult-use cannabis program, providing an entry point into what many see as the first fully regulated European cannabis market.

Operationally, Cronos has shown progress in its international businesses, with revenue growth driven by demand in Europe and Israel and expanded gross margins reflecting a shift toward higher-value markets. Backed by one of the strongest balance sheets in the cannabis sector, the company’s ability to execute on acquisitions like CanAdelaar — even as broader industry volatility persists — underscores its strategic emphasis on global expansion and market leadership beyond North America.

Estimates for CRON’s 2025 loss per share have narrowed from 8 cents to 1 cent in the past 60 days. During the same time frame, EPS estimates have risen from 6 cents to 8 cents in 2026. The stock has climbed about 30% year to date.

Village Farms

With a Zacks Rank #1, Village Farms has been strengthening its foothold in the cannabis space by reshaping its business mix and accelerating international growth. The company’s exit from its fresh-produce operations marked a strategic pivot, allowing management to channel resources toward higher-margin cannabis assets — a move that has begun to translate into improved operating performance.

Internationally, Village Farms’ medical cannabis export sales surged 758% year over year in the third quarter of 2026, supported by robust demand in Germany and consistent traction across other overseas markets. This expanding global footprint has become an increasingly important contributor to overall results.

These efforts have positioned Village Farms among a small group of cannabis operators generating positive EBITDA and cash flow from cannabis operations. Management has also highlighted the company’s standing as one of Canada’s top five cannabis producers, underscoring its ability to scale profitably in a highly competitive environment.

Estimates for VFF’s 2025 EPS have risen from 12 cents to 21 cents in the past 60 days. During the same time frame, EPS estimates for 2026 have risen from 14 cents to 24 cents. The stock has skyrocketed 371% year to date.

Tilray Brands

One of the most established names in the cannabis space, this Zacks Rank #3 company continues to push its international strategy. Tilray has been expanding its medical cannabis operations across Europe, with growing traction in Germany and Italy supported by new product introductions and its CC Pharma distribution network.

Tilray has also leaned heavily on diversification to stabilize results. Beyond cannabis, the company has built a sizable craft beverage portfolio through multiple acquisitions and partnerships, helping offset volatility in its core operations. Meanwhile, its cannabis business continues to show progress, driven by stronger Canadian adult-use demand and steady growth in international medical sales.

In the past 60 days, loss estimates per share for Tilray’s fiscal 2026 (year ending May 2026) have improved from 27 cents to 25 cents. Shares of the company have lost 32% so far this year.

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This article originally published on Zacks Investment Research (zacks.com).

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