Wall Street analysts say a Democratic sweep in November that puts Joe Biden in the White House and the party in control of the Senate could be a boon for cannabis stocks. Analysts at CIBC and Cowen picked seven stocks to bet on that would benefit investors if the Democrats win, including Green Thumb Industries, Curaleaf, and Canopy Growth. As public support for cannabis reform picks up steam in the US, Wall Street analysts say signs are pointing to a turnaround in the formerly troubled sector, especially as a few companies posted solid earnings over the past week.

Vivien Azer, a cannabis-industry analyst at the investment bank Cowen, said in an August 7 note that presumptive Democratic nominee Joe Biden's polling lead is a "positive sign for the industry." That, on top of the pandemic-induced sales bump, has upped investor confidence in the sector after months of stock declines and layoffs. While Azer said that real power on cannabis reform rests in the Senate, rather than the White House, she and her team "reiterate the view that a Democratic sweep means 2021 legalization."

John Zamparo, a cannabis-industry analyst at CIBC, said in a July 17 note that a Democratic victory in November could boost US firms, as well as Canadian cannabis firms with interests in expanding to the US. "A clean sweep by the Democrats would, in our opinion, most benefit Canadian operators with strong balance sheets and US ambitions," Zamparo said. Despite that, Biden himself is not supportive of federal legalization. His campaign has called for rescheduling cannabis to allow more research and decriminalizing possession, but it has stopped short of calling for full-scale federal legalization. Kamala Harris, his vice-presidential pick, has supported federal legalization legislation in the past, including the MORE Act. "The more important hurdle to achieving real change involves Democrats flipping the Senate," Zamparo wrote.

Here are the analysts' top picks of cannabis stocks to bet on:

Green Thumb Industries (GTII)

After the Chicago-based cannabis firm posted a "far better than expected quarter" on Wednesday, Cowen's Azer said Green Thumb remained her top pick in US cannabis. She raised her price target on the stock to $20 and maintained her "outperform" rating.

To Cowen, the "key standout" of Green Thumb's solid quarter was the 39% increase in adjusted EBITDA, a figure that removes onetime costs from overall earnings, which was well ahead of analyst forecasts. 

Curaleaf (CURA) 

Curaleaf reports earnings on Monday after the market close, so we'll get more insight into how the US cannabis giant fared over the past quarter then.

That said, Cowen said Curaleaf's profitability and focus on the "market depth vs market breadth" approach would benefit it in the long term.

Cresco Labs (CL)

Cresco Labs reports earnings on August 20. Cowen has maintained its outperform rating on the stock and expects to see $70 million in sales when the firm reports.

Cronos Group (CRON)

CIBC said the Nasdaq-listed Canadian cannabis cultivator Cronos Group was "perhaps best positioned" for US legalization, given its relatively low cash-burn rate and what CIBC says are its relationships with US cannabis retailers via its connection to Gotham Green, a US cannabis investment firm founded by Cronos CEO Michael Gorenstein. CIBC has an outperform rating on the stock.

Canopy Rivers (RIV)

CIBC said the TSX-listed Canopy Rivers, the investment arm of Canopy Growth (though a separately-traded entity), could benefit from US legalization because of its "capital-light" nature and connections opened through the Canopy name. 

CIBC said Canopy Rivers and Cronos were its favorite names in cannabis at the moment, among the stocks the Canadian bank covers. The firm reported earnings on Friday morning.

Aphria (APHA)

CIBC said Aphria would be well-positioned to strike in the US because the Canadian cannabis cultivator would likely enter the US through brand partnerships, rather than by trying to cultivate cannabis in the US. The bank cautioned that Aphria has not stated its plans to enter the US yet, and it has a neutral rating on the stock.

Canopy Growth (WEED)

Both CIBC and Cowen said Canopy Growth was in a good position to capitalize on US cannabis reform. The Canadian cannabis giant reported better than expected revenue on Monday for its most recent quarter, and Cowen maintained its outperform rating on the stock.

CIBC is less bullish, saying that Canopy's new management under CEO David Klein is promising, but it kept its neutral rating on the stock.

"Much work remains in winning over price-conscious consumers and optimizing margins in Canada, and also building a nascent US business," CIBC said.

Canopy is launching its US CBD brand in partnership with Martha Stewart next month and has existing agreements with TerrAscend and Acreage Holdings to take equity positions in both companies if and when the US federal government allows.

Cowen noted that Canopy's leadership said that with the renewed focus on cannabis legalization's role in criminal-justice reform — spurred on by the Black Lives Matter movement — changes could come more quickly than expected. And at the state level, cannabis legalization could help fill budget shortfalls caused by COVID-19.