With earnings season in full swing, it’s time to start looking at winners and losers. In the case of cannabis stocks, investors are still looking at a case of low demand and oversupply. At the end of 2018, the marijuana bubble vaporized. And since then, cannabis stocks have struggled to find direction. At every stage, it’s been one delay after another.

But there is growing evidence that we may finally be in the “when” not “if” stage for the cannabis revolution. As retail stores open up in Canada, cannabis products are beginning to sell. What’s even better is there is at least some evidence that consumers are willing to pay slightly higher prices to get the perceived safety of products not being sold on the black market.

That would seem to bode well for Canopy Growth (NYSE:CGC) and Tilray (NASDAQ:TLRY). Both of these cannabis stocks were expected to make it through the consolidation phase that the market needs to go through. Both have made key strategic partnerships. And both are creating a footprint outside of Canada.

But which stock is the better buy right now? At first glance, you would point to Canopy. Both stocks are down for the year, but Canopy is only down 14% while Tilray is down a whopping 56%. But is the case that simple? The two companies are approaching growth from two very different angles.

Canopy Growth Has Cash to Burn

The bullish case for Canopy Growth may begin and end with the partnership that it has with Constellation Brands (NYSE:STZ). This has allowed Canopy to maintain a large cash position that is enviable considering the company, along with almost every company in the sector, is not profitable.

But as the calendar turned to 2020, investors were making it clear that it was no longer going to be good enough for cannabis companies to simply play defense and hoard cash. Investors wanted to see some revenue. And Canopy, at least for one quarter delivered.

In the company’s last earnings report, the company beat on both the top and bottom lines. This was a welcome sight for investors who were a little nervous after Aphria (NYSE:APHA) posted poor results. The positive report suggests two things. First, the retail market is opening up in Canada. And second, Canopy made a solid choice in choosing former Constellation chief financial officer (CFO) as their chief executive officer (CEO).

One category that helped Canopy increase its revenue was the cannabis-infused beverage market. This is why Constellation made the investment and with the launch of the Tweed Houndstooth & Soda brand (and others to follow) the company may finally have products that move the needle.

The big prize for all cannabis companies remains the United States. And Canopy took a big step in that direction by acquiring Acreage Holdings. Although the path to legalization at the federal level remains unclear, there may be more clarity after the election.

Tilray is Taking a Different Approach

Tilray didn’t have a good earnings report. In fact, it was really bad. Tilray is seeing solid but not spectacular growth in the recreational sector. Tilray is not uninterested in the recreational cannabis market, and they are optimistic about the success of Cannabis 2.0 products. Plus, Tilray has its own partnership with Anheuser-Busch InBev (NYSE:BUD) to develop cannabis-infused beverages.

But the company has always staked its claim to the medicinal marijuana market. Tilray has a partnership with Novartis that is helping the companies co-market medical cannabis products. Although they are only available in Canada now, they will be expanding to the broader cannabis market.

Some highlights from the company’s report included a 65% growth in sales from Canada Medical. This was a 13% of the company’s revenue which was a year-over-year increase from the 9% it recorded in 2019.

Tilray also posted a 349% growth in international medical. International medical is now 28% of revenue, which is 300% higher than the 7% in the same period for 2019.

More impressively, Tilray has now posted two consecutive quarters where international revenue for medicinal marijuana was more than Canadian revenue.

And Tilray is also looking to get a foothold in the U.S. market. That was the rationale behind the company’s purchase of Manitoba Harvest, the world’s largest hemp food company.

And the Winner Is …

I’m a big fan of the cannabis sector. Even when the sector was crashing last year, I held to my belief that the growth in this market is a question of when and not if. And the contrast between Canopy’s approach and Tilray’s approach shows that the sector is maturing.

Keep in mind that neither company is profitable. And it may be quite some time before they are. But if you’re willing to take a risk, both of these stocks should be around when the sector turns.

Simply from a technical perspective I think Tilray may offer investors the better short term gain. But over the long haul, I believe Canopy’s superior cash position puts it in a better position to maximize shareholder value.

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