Cannabis stocks come in so many different shapes and sizes. Some are focused purely on flower production, while others aim to tackle the growing “Cannabis 2.0” segment, filled with value-added products such as oils, edibles, and cannabis-infused beverages.
Many are small, single-state or single-province producers. Others take a more vertically integrated approach, including retail and distribution, into their models.
With so many options to choose from, cannabis investors can rightly feel overwhelmed. However, some cannabis stocks are better than others. In the view of many analysts, Curaleaf Holdings (CURLF) is one of the best.
Here’s why. (See Curaleaf stock charts on TipRanks)
Business Model Extremely Enticing
Investors seeking exposure to the cannabis sector may be looking to pick the player with the greatest potential to dominate the markets that matter. In this regard, Curaleaf certainly makes a strong case as a leading candidate.
The company’s core business model is focused on a vertically integrated, coast-to-coast approach in the United States. As a multi-state operator, Curaleaf has grown to be the largest cannabis player in the U.S. This is a big deal for cannabis investors, as explained below.
First, the U.S. market is massive. Many publicly traded cannabis companies are currently focused on the Canadian market, as it’s one of few that are recreationally legalized from a federal perspective.
Additionally, the potential for cannabis legalization in the U.S. has continued to loom as a high-profile catalyst that could take valuations on another impressive ride from here. While Senator Chuck Schumer’s proposed bill decriminalizing marijuana is the first step toward the ultimate goal of legalization, it remains to be seen if this catalyst will materialize during President Joe Biden’s first term.
That said, for U.S. cannabis players, this potential catalyst is a big one to watch from here.
Key Reasons to Own CURLF Stock
From a valuation perspective, I think there’s a lot to like about Curaleaf right now. The company is projected to double its revenue this year to $1.3 billion. Such a move would make the company’s existing valuation of $8.5 billion seem reasonable. This would equate to a price-sales multiple of roughly 6.5.
In most sectors, that would certainly be considered high. However, compared to most of the company’s competitors, Curaleaf looks like a bargain. This is a company with one of the best valuation multiples in its sector. Additionally, the company’s aforementioned exposure to the U.S. market should provide for higher growth.
How much higher? On a forward-looking basis, analysts expect this company to post triple-digit growth next year. That’s incredible, in any market. Given the head start Curaleaf has on its competition, many investors are right to look at Curaleaf as a potential winner in the long-term race for cannabis market share.
Wall Street’s Take
According to TipRanks’ analyst rating consensus, CURLF stock comes in as a Strong Buy. Out of eight analyst ratings, there are eight Buy recommendations.
The average CURLF price target is $22.57. Analyst price targets range from a low of $19.16 to a high of $27.15 per share.
Curaleaf is perhaps the best cannabis play in the market right now. Its shares do trade over-the-counter, so investors will need to put up with lower liquidity and higher bid-ask spreads. However, over the long run, these issues should be resolved. Should cannabis be legalized, expectations are that this cannabis player will pursue a U.S. listing in short order.
For now, this is a stock investors shouldn’t ignore. The potential upside with CURLF stock speaks for itself.
Disclosure: Chris MacDonald held no position in any of the stocks mentioned in this article at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.