CURLF Stock: U.S. Pot Stock Leader Continues to See Gains

CURLF Stock: Top U.S. Mairjuana Stock Banks on LegalizationCURLF Stock: Top Pot Stock in the World?

There hasn’t been much luck to be found in the marijuana stock market lately. Just when things were looking up—increased U.S. legalization in the piecemeal state fashion with hopes of federal legalization down the line, Canadian market growing, support building globally for relaxed marijuana laws—all that was put aside due to the COVID-19 crisis sucking all the political air out of the room. After all, it would be pretty untactful for politicians to keep on about U.S. marijuana legalization when they can’t even sort out the care of their citizens in the time of a pandemic. But even through all that, one share price in the pot market is still up: CURLF stock. And that makes Curaleaf Holdings Inc (OTCMKTS:CURLF, CNSX:CURA), at this stage, my pick for top marijuana stock in the world.

The reasoning behind its selection is pretty simple: it’s the only marijuana stock with a major stake in the U.S. market.

The company operates in 23 U.S. states, with 88 local dispensaries in said states, 30 cultivation sites, over 22 processing sites, 1,150 wholesale dispensary accounts, and more than 350,000 patients. (Source: “Curaleaf About Us,” Curaleaf Holdings Inc, August 20, 2020.)

This kind of U.S. foundation is singular in the world right now; no other marijuana company comes close to matching CURLF stock in terms of its U.S. reach, which helps explain why so many investors and analysts (myself included) have been bullish on Curaleaf stock for so long.

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Remember that Curaleaf was hoping to become the first marijuana company to hit $1.0 billion in profits? (Source: “Cannabis Canada: Will Curaleaf be the first pot company to report US$1B in sales?,” BNN Bloomberg, August 28, 2019.)

With COVID-19 in play, I doubt it’ll reach those numbers, but that’s not exactly the company’s fault. And it certainly doesn’t sour the company’s future. COVID-19 is temporary—people’s desire for marijuana products has much more longevity.

Really, what CURLF stock has that almost no other marijuana stock can claim is a eye on the future.

Many pot stocks at play right now have scaled back their international expansion. You’ll recall that Canopy Growth Corp (NYSE:CGC), the largest marijuana company by market cap, shed itself of Bruce Linton, founder and CEO, after a large chunk of its shares were gobbled up in a deal with Constellation Brands, Inc. (NYSE:STZ), a major alcohol producer.

Constellation Brands Inc and its leadership were interested in profits, not growth, while Linton had always been a forward-minded executive. The clash led to his departure…and Canopy Growth Corp’s move to cut costs and juice up profit, at the expense, of course, of growth.

That’s a common enough story on the stock market: a younger startup is acquired or has major portions of its shares bought up by a larger and more established institution, only for said institution to stifle the startup’s growth plan in favor of profits now.

While I’m not saying the move will necessarily be disastrous for CGC stock, ultimately, in my view, it was the wrong way to take the company.

Yes, we all want to see these marijuana stocks start making some cash, but focusing on profit too early in the game runs the risk of darkening the horizons of future profits far exceeding what they could hope to earn now.

In other words, Canopy Growth Corp has decided to trade the future for the now, so it has over time become a less attractive option to me. It’s still a potentially good stock opportunity, but one that holds less promise than it previously did.

CURLF stock, on the other hand, retains all that potential and more, because it’s operating much like the Canadian pot stocks did in the lead-up to legalization. Remember that from 2016 to 2018, we saw huge growth precede Canadian marijuana legalization, something that will undoubtedly replicate itself in the U.S. when legalization does come at a federal level.

And when that day does arrive, investors’ eyes should be locked squarely on Curaleaf stock. This company, after all, already has a huge U.S. network of marijuana sales and distribution.

When U.S. marijuana legalization hits, expect the company to expand rapidly as well as form partnerships with other pot companies looking to enter the U.S. market. Acting as a gatekeeper in this way will turn out potentially enormous profits for the company, making it arguably the pot stock with the most potential on the market right now.

In fact, of all the marijuana stocks available right now, Curaleaf stock is one of the few to actually register gains in 2020. Impressive gains at that: shooting up nearly 20% year-to-date.

Chart courtesy of StockCharts.com

Curaleaf Stock Financial Report

Another reason to be excited about CURLF stock is the company’s financial report, which once again impressed.

The company came in with record-highs in pro forma revenue at $165.4 million and managed revenue of $121.4 million, with first-half revenue similarly exceeding its former records at $226.4 million. (Source: “Curaleaf Reports Record Second Quarter 2020 Financial and Operational Results,” Curaleaf Holdings Inc, August 17, 2020.)

The company also recorded adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $28.0 million as operations in 17 states continued to grow and scale.

($ Thousands, Except per Share Amounts)

Q2 2020

Q1 2020

 % QOQ
Change

Q2 2019

 % YOY
Change

Managed Revenue

$121,402

$105,022

16%

$55,100

120%

Total Revenue

$117,480

$96,496

22%

$48,489

142%

Gross Profit before Impact of Biological Assets

$60,636

$52,483

16%

$26,020

133%

Gross Profit on Cannabis Sales

$42,735

$33,042

29%

$15,257

180%

Gross Margin on Cannabis Sales

43%

43%

n/a

40%

n/a

Adjusted EBITDA

$27,994

$20,006

40%

$4,412

534%

Net Income (Loss) Attributable to Curaleaf Holdings Inc

($2,029)

($15,089)

n/a

($24,541)

n/a

Net Income (Loss) per Share – Basic and Diluted

($0.00)

($0.03)

n/a

(0.05)

n/a

The company also marked several complete projects and goals in the quarter, expanding its business side with its acquisition of Grassroots, compounding on Curaleaf Holdings Inc’s already impressive size.

The company also completed expansions in New Jersey, Maine, and Colorado.

And what makes all this even better: it’s coming during a pandemic when huge swaths of the economy slowed. If this is how good CURLF stock can perform during the worst of times, imagine it at its best.

Analyst Take

The marijuana market has long been focused on the future and potential. Many analysts have lost sight of that in recent weeks and months, instead focusing on profit in the now. But to me that’s silly: so much of the marijuana market remains under the control of the black market in countries both where it is legalized and where it isn’t.

In other words, we’re still only getting a small slice of this big pot pie. U.S. marijuana legalization, more popular than ever and genuinely receiving robust political support at all levels of government, remains another huge slice of that pie that we’ll likely be able to dig into within the next decade.

So, don’t get too distracted by the urgency of the now. Instead, like all great stock traders, look to the future potential of a market and company. If someone can predict that, they have the possibility to become very rich in the process.

And right now, all signs in the marijuana market are telling us that CURLF stock is going to be a big winner when the market finally kicks into full gear, making this one of the most high-potential marijuana stocks in the world right now.