Amidst multiple economic challenges, the upcoming midterm elections will provide a referendum on Joe Biden. However, these midterms are important for several other reasons. Governors are up for election in 36 states, with hot topics like state-level marijuana legalization likely to remain. With this upcoming event, it’s a good time to consider some marijuana stocks to buy.

So, what’s the potential catalyst for the marijuana industry in the upcoming elections?

First and foremost, the election of governors in 36 states could have an impact on legalization. Recently, Gavin Newsom, governor of California, “signed several measures to strengthen California’s cannabis laws.” These measures are intended to expand the legal cannabis market. If other governors from the Democratic party are elected, investors bullish on marijuana legalization could see growth in this sector once again.

Furthermore, President Biden made a statement in October on marijuana reforms. Biden announced the release of federal convicts held just for possession or consumption of marijuana. The President also called for review of the law that “classifies marijuana in Schedule I of the Controlled Substances Act.”

Clearly, if the Democrats have the upper hand, marijuana stocks are likely to surge. Of course, the baseline scenario right now paints a gloomy outlook for the Democratic party. That said, investors have to take risk to earn a return on their investment. For those looking to do so in the cannabis space, here are three marijuana stocks to buy with potential multi-bagger returns.

Tilray Brands (TLRY)

Even if we put the legalization story aside, there are reasons to be bullish on Tilray Brands (NASDAQ:TLRY).

Tilray recently reported Q1 2023 results. The company’s revenue numbers generally disappointed investors. However, the company continues to report positive adjusted EBITDA. Tilray has also reaffirmed its guidance for positive free cash flows for the fiscal year 2023. This is good news for investors, particularly at a time when most marijuana companies continue to struggle with cash burn.

Tilray has also been aggressive on the medicinal cannabis front. With a focus on evidence-backed products, the company has already received authorization to enter multiple markets in Europe. These include Poland, Italy, and the U.K.

The company has a strong balance sheet with $500 million in cash. Thus, Tilray is well-positioned to make big investments in the future, should federal cannabis legalization in the U.S. pan out. Right now, I think this penny stock is worth buying, especially when considering the stock’s 55% correction year-to-date in 2022.

Curaleaf Holdings (CURLF)

It’s worth noting that Curaleaf Holdings (OTCMKTS:CURLF) has traded in a relatively narrow sideways band over the past six-months. This may be an indication of a bottom for the stock, and I think a reversal seems due in the coming quarters.

A big reason to like Curaleaf is the fact that the company has a presence in 22 states in the U.S. Accordingly, revenue growth can accelerate materially, should marijuana be legalized at federal level. At the same time, Curaleaf has presence in eight countries in Europe.

Another reason to like Curaleaf is the company’s investment in research and development. For Q2 2022, the company reported 20% of its revenue came from products launched in the last 12 months. The company claims to have another 180 products in experimental development.

For the current year, Curaleaf has guided for revenue of $1.5 billion and adjusted EBITDA of $406 million. A key stock upside trigger in the next two years would be positive free cash flows. For the first half of 2022, the company has already reported positive operating cash flows.

Sundial Growers (SNDL)

Sundial Growers (NASDAQ:SNDL) is among the marijuana stocks to buy that’s likely to find a bottom around current levels. As an overview, Sundial is focused on distribution and sale of cannabis products in Canada. However, through its investment arm, Sundial has a bigger reach.

Just to put things into perspective, Sundial has 355 retail stores which sell liquor and cannabis in Canada. Additionally, the company reported $689 million in strategic investments (equity and debt).

As the global cannabis market expands, the value of the company’s equity investments is likely to swell. Sundial can therefore be considered as a proxy for investment in several attractive cannabis stories globally.

It’s also worth noting that Sundial closed Q2 2022 with $356 million in cash and marketable securities. This provides headroom for further investments. In August 2022, Sundial has proposed the acquisition of The Valens Company for $138 million. The latter has a full suite of cannabis 2.0 manufacturing capabilities.

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On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.