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Why Curaleaf Stock Has the Ability to Be the Most Profitable Pot …

Curaleaf Stock Poised to Top All Other Marijuana Stocks?

I’ve covered marijuana stocks for years now, ever since Canada became the first major economy to legalize pot and many U.S. states followed suit. In that time, I’ve seen many pot companies vie to become the top producers in the industry. And I’ve seen many fail.

One pot stock in particular, Curaleaf Holdings Inc (CNSX:CURA, OTCMKTS:CURLF), has the ability to become a dominant force in the industry.

First, a quick background.

Many pot companies have tried to lay claim to some top metric: production capacity, profit, earnings growth, number of products, number of states/provinces/countries it operates in, etc.

While many have tried to become the top marijuana stock, if we go by market cap and influence, there’s little doubt which weed stock stands above the rest: Canopy Growth Corp (NYSE:CGC).

With a market capitalization nearing $10.0 billion, Canopy Growth stock has long been seen as the industry standard-bearer. Rightfully so.

Canopy Growth was able to expand massively across Canada and Europe, as well as sign major deals—like the one with Constellation Brands, Inc. (NYSE:STZ), which sent share prices soaring.

Indeed, it looked like Canopy Growth Corp did enough to set itself apart from the pack. And it positioned itself well for the future, with its deal to eventually acquire Acreage Holdings Inc (CNSX:ACRG.A.U, OTCMKTS:ACRHF).

The Acreage Holdings deal is of particular interest, as it opens the door for Canopy Growth to enter the U.S. market, acquiring much of Acreage Holdings if/when the U.S. legalizes marijuana at the federal level.

The Canopy Growth/Acreage deal has undergone a bit of change, however. With Bruce Linton gone as the head of Canopy Growth Corp (he was CEO when the deal to acquire Acreage Holdings Inc was struck), there was some unalignment as to where the company was heading.

Whereas Linton had the company focused on growth and acquisitions, the new leadership opted to go on a steadier route and deal with the losses on the books, rather than invest in the future.

It’s a strategy I don’t necessarily agree with (there’s a long history of hugely successful companies stomaching short-term losses in order to gobble up market share of a burgeoning industry), but it’s one I understand.

In any case, Canopy Growth Corp has since scaled back its acquisition plans of Acreage Holdings, although it still intends to acquire most of the company when federal U.S. marijuana legalization hits. (Source: “Here’s How to Make Sense of the Canopy Growth, Acreage Deal,” Real Money, October 2, 2020.)

What’s really worth noting is the changing attitude at Canopy Growth. As I just mentioned, the company is no longer focused on rapid expansion and growth. Instead, it’s more concerned about making profits in the here and now. That has opened up opportunities for other pot companies to prosper.

Tilray Inc (NASDAQ:TLRY), for instance, got a huge shot in the arm this year when it acquired Aphria Inc. The move sent TLRY stock soaring, and now it’s up by more than 122% over the past six months.

Chart courtesy of StockCharts.com

Canopy Growth stock could have experienced those gains if the company was still interested in expansion. Unfortunately, the new leadership is more focused on the present, which I think will work to its detriment in the long run.

But while I applaud Tilray Inc’s move, that doesn’t mean I believe TLRY stock is the new king of marijuana stocks. Why? Mainly because it’s an unproven commodity.

Tilray stock made a big splash on the market when it went public in 2018—the first pot stock to do so on a major U.S. exchange. But that hype quickly died down, sending TLRY stock on a long and precipitous decline in the subsequent years.

In other words, even with Tilray Inc’s acquisition of Aphria Inc, I’m hesitant to proclaim Tilray Inc the heir apparent of the marijuana industry.

Instead, the company that really intrigues me is Curaleaf Holdings Inc. The largest marijuana player in the U.S., CURLF stock has been on my radar for a long time.

Curaleaf stock is poised to explode in value when federal U.S. marijuana legalization is announced. That’s because the company has a huge presence in the U.S. market across many states, and that presence only continues to grow.

What’s more, Curaleaf Holdings Inc has shown some serious progress from a financial point of view. The company is set to have a billion-dollar-revenue year. That sets it way ahead of most of its competition.

And that’s coming before U.S. federal marijuana legalization. When federal legalization arrives, the company will see a ton of interest, as it will be able to list its shares on a major U.S. stock exchange.

Curaleaf Holdings Inc Q1 2021 Financial Highlights (Unaudited)

Dollar Figures in Thousands (Except Per-Share Amounts) Q1 2021 Q4 2020 Quarter-Over-Quarter Increase Q1 2020 Year-Over-Year Increase
Total Revenue $260,320 $230,253 13% $96,496 170%
Gross Profit Before Impact of Biological Assets $128,467 $110,595 16% $52,483 145%
Gross Profit on Cannabis Sales $128,030 $109,625 17% $33,042 287%
Gross Margin on Cannabis Sales 49% 48%   43%  
Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization $62,625 $53,784 16% $20,006 213%
Net Income Attributable to Curaleaf Holdings Inc -$17,211 -$35,274   -$15,089  
Net Income per Share: Basic and Diluted -$0.03 -$0.05   -$0.03  

(Source: “Curaleaf Reports Record First Quarter 2021 Financial and Operational Results,” Cision, May 10, 2021.)

Analyst Take

Between Curaleaf Holdings Inc’s already stellar financial position and its growing presence in the U.S. market in advance of federal U.S. legalization, I’m firmly behind CURLF stock being the likely future king of the marijuana industry.

I believe Curaleaf stock is at the front of the pack of the pot sector, having the best chance to dominate the market for years, maybe even decades, to come.

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