The cannabis industry is riding high on a wave of optimism as the Drug Enforcement Agency (DEA) gears up to reschedule marijuana, downgrading it from a highly dangerous Schedule I drug to a Schedule III substance. This historic move, which comes after a recommendation from the Department of Health and Human Services (HHS), has sparked a surge in pot stocks, with investors anticipating that rescheduling could open up a whole new financial and regulatory frontier in the rapidly evolving cannabis sector.
And let's be real; the numbers speak for themselves. With the global cannabis industry already projected to reach a staggering $64.73 billion in revenue this year, with an anticipated compound annual growth rate (CAGR) of 3.01% from 2024 to 2029, the future looks bright for this niche of the market.
The rescheduling news has particularly benefited names like Curaleaf Holdings, Inc. (CURLF), a leading international provider of consumer products in the cannabis industry. Curaleaf is no small fry, owning and operating a whopping 145 dispensaries and 18 cultivation sites across 17 U.S. states. They've got a strong presence in some of the most populated medical and recreational cannabis states, like Arizona, Florida, Illinois, Massachusetts, New Jersey, New York, and Pennsylvania - positioning them well to capitalize on the industry's growth.
Adding to the excitement, Wedbush Securities recently reiterated its “Outperform” rating on CURLF and raised its 12-month price target on the stock, too. With Curaleaf stock currently trading under $10 per share, this could be an attractive entry point for investors looking to get in on the action.
Curaleaf Stock's Rising Momentum and Q1 2024 Scorecard
Curaleaf Holdings (CURLF) has been on a roll lately. Over the past 52 weeks, the over-the-counter marijuana issue has surged 86%, including a 29.6% rally so far in 2024 - which essentially means CURLF is outperforming the broader markets like a boss.
With a market cap now hovering around $3.43 billion, CURLF - which is not yet profitable - is priced at 2.95x forward revenue. That's a nearly 50% discount to its five-year historical average p/s ratio of 5.85, and it also compares favorably to the healthcare sector median of 3.68x.
Curaleaf recently dropped its earnings report for Q1 of 2024 on May 9. The company reported revenue of $339 million, representing a 2% year-over-year increase. The company's quarterly loss totaled $48.3 million, or $0.7 per share, but they also achieved an adjusted gross margin of 48% and an adjusted EBITDA of $77 million, or 23% of revenue. That's a 40 basis point improvement compared to the same period last year.
Additionally, Curaleaf ended the quarter with operating cash flow of $46.1 million and free cash flow from continuing operations of $33.1 million.
Curaleaf Goes Global
Curaleaf Holdings has been making significant strides in its international expansion strategy, recently announcing the closing of its $16 million acquisition of Northern Green Canada (NGC). NGC is a vertically integrated Canadian licensed cannabis producer with a strong focus on the international market, thanks to its EU-GMP certification. This acquisition is a big deal for Curaleaf, as it bolsters their supply of high-quality cannabis flower to key European markets like Germany, Poland, and the UK, and also opens doors to emerging markets in Australia and New Zealand.
The timing of this acquisition couldn't be better, especially with the recent developments in Germany. The German Bundestag recently passed the Federal Government's cannabis law, also known as Pillar 1, to open up adult use of cannabis. More specifically, this new law removes cannabis from the narcotics list and sets up comprehensive regulations for the recreational market in Germany. It's a landmark move that aims to destigmatize and decriminalize cannabis for both patients and consumers.
Juan Martinez, Head of Curaleaf International, has been vocal about the positive impact of this legislation. He highlighted that the law will not only benefit patients and consumers, but also pave the way for a thriving and regulated cannabis market in Germany. Martinez also emphasized that this regulatory shift will allow for broader insurance coverage and reduce administrative burdens for prescriptions, ultimately fostering market growth.
Against this backdrop of global expansion, Curaleaf now describes itself as an “MCO” - a multi-country operator - instead of an MSO, or multi-state operator.
What Do Analysts Say About CURLF Stock?
Curaleaf Holdings has been catching new attention from analysts amid the rising buzz on cannabis. Wedbush Securities is all in on CURLF, with analysts Gerald Pascarelli and Antoine Legault backing an "Overweight" rating and bumping up their 12-month price target to a cool $7 - about 36.2% north of current levels.
Looking ahead, Wedbush is forecasting an EBITDA of $404 million on hefty revenue of $1.5 billion for fiscal year 2025.
Right now, the stock is sitting pretty with a "Moderate Buy" rating overall, and Wedbush's new target is roughly in line with the $7.06 mean price target.
Breaking it down, you've got 7 analysts shouting from the rooftops with a "Strong Buy," one going with a "Moderate Buy," and three suggesting to play it cool and “Hold.”
The Bottom Line on CURLF Stock
In a nutshell, Curaleaf Holdings (CURLF) is making all the right moves in the booming cannabis industry. With a solid uptrend in stock price, strategic moves to expand, and favorable regulatory changes, Curaleaf is well-positioned for growth. Plus, analysts are optimistic, and the numbers back up that bullish sentiment.
So if you're looking for a promising growth stock under $10 with long-term upside potential, Curaleaf might just be worth a deeper look here.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
