Curaleaf Holdings (CURLF) operates in a specific sub-sector of the wellness industry. The company is a leader in providing cannabis-derived consumer products to the global medical and adult markets.
CURLF operates in 23 states in the United States and owns 111 dispensaries and 25 cultivation sites. In Europe, the company is vertically integrated, and its distribution network serves several local markets.
Curaleaf Holdings shares have performed poorly over the last year, losing more than 42% while the overall market rose significantly.
As with many marijuana stocks, Curaleaf is paying the price of a slump in the wellness economy, as record inflation, fueled by the rapid recovery from the COVID-19 crisis, has likely prompted consumers to prioritize more important spending.
However, the spread of COVID-19 has also increased the need to take care of ourselves, and as such, the wellness industry is bound to grow again.
So, after a foggy spell, I think that Curaleaf and other operators are poised to rebound on an expected surge in demand for nutraceuticals, herbs, cannabis, and other mental wellbeing and relaxation products and services.
The entire industry has grown rapidly in recent years and is now worth nearly $5 trillion globally.
Thus, I am bullish on this stock.
Q3 Earnings
Despite some near-term headwinds, the company executed its growth strategies well and even gained market share in the third quarter.
Curaleaf’s revenue was $317.1 million in the third quarter, up nearly 74% year-over-year, and ongoing operations generated a cash inflow of $51.7 million. Adjusted EBITDA also increased 70% year-over-year to $71 million.
However, revenue has yet to increase for the bottom line to be positive as the period ended with a GAAP net loss of $0.08, missing the average consensus estimate by $0.08.
Looking Ahead
The company said that it is on track to reach revenues of between $1.2 billion and $1.3 billion in 2021, which will reflect a 99% growth rate from 2020.
The Company Grows Through Acquisitions
Last October, the company acquired Los Sueños Farms, which helped Curaleaf expand its total cannabis cultivation to almost 4.5 million square feet.
Curaleaf plans to acquire Tryke Companies to have six of Reef Medical’s best-selling retail locations in Nevada and Arizona. This deal should close in the second part of 2022.
Curaleaf’s Arizona footprint expands with the acquisition of Natural Remedy Patient Center, LLC, a Safford-based dispensary, and Bloom Dispensaries. Both deals are expected to close later this month.
So, Curaleaf’s retail presence will grow to 16 dispensaries in Arizona and 128 dispensaries statewide.
Prospects of the U.S. Cannabis Industry
If marijuana is legalized federally, Curaleaf and other multi-state operators (MSOs) will have access to the U.S. banking system, which could potentially propel stock prices to incredibly higher levels. In addition, federal legislation would help multi-state marijuana stocks tremendously to win the competition from illegal sellers.
There is cautious optimism that such legislation could be passed later this year, as U.S. lawmakers can no longer ignore a market that is expanding like crazy. According to Bank of America Corporation (BAC), approximately $25 billion was spent on legal cannabis in 2021.
Meanwhile, the number of states where dispensaries are opening is increasing, with New Jersey and New York expected to boost Curaleaf’s revenue starting this year.
Global legal cannabis sales have also grown rapidly to over $30 billion last year.
Wall Street’s Take
In the past three months, 11 Wall Street analysts have issued a 12-month price target for CURLF. The company has a Strong Buy consensus rating, based on nine Buys and two Holds assigned in the past three months.
The average Curaleaf Holdings price target is $18.62, implying a 145% upside potential.
Conclusion
The stock is growing through acquisitions as it braces for strong tailwinds should the U.S. federal system also legalize cannabis sales. The company continues to grow in Europe as well. The conditions for a significant recovery in the share price are forming.
Download the TipRanks mobile app now
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Read full Disclaimer & Disclosure
