Down Debt

Down 58%, Wall Street thinks this growth stock could more than double

Many marijuana stocks may be undervalued right now due to market pessimism regarding cannabis reforms in the United States. But these growth stocks are part of a fledgling industry that has yet to reach its full potential. Experts predict the industry could double in value to $72 billion by 2030. This sector is perfect for investors who have a long-term investment horizon.

With a little patience, these exciting stocks could bring huge long-term returns. Even in a limited legal U.S. market, where the drug is federally banned, the Massachusetts cannabis producer Curafeuille Holdings (CURLF 0.00%) generated nearly $1.2 billion in revenue over the past 12 months, outperforming its peers. Let’s see why buying this falling pot stock now could be good for investors.

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Timely growth strategies work

Impressive and consistent quarterly performance is a sign that a company is doing everything right. Curaleaf revenue grew 20% year-over-year to $313 million in the first quarter. Much of the credit can be attributed to its timely and strategically planned acquisitions over the past two years, new store openings and new product launches. Some of these acquisitions include cannabis operators and brands like Select, Curaleaf NJ, Blue Kudu, Remedy and Grassroots.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) continue to rise each quarter, reaching $72 million in the first quarter, a jump of 16% from the prior year period. Curaleaf also generated operating cash flow of $57 million during the quarter. The company opened 11 new stores in the first quarter alone, bringing its total to 128 nationwide.

New Cannabis Markets in States Will Significantly Boost Revenues

Curaleaf’s retail revenue grew 21% year-on-year to $226 million, driven primarily by 26 new stores opened during the year in key markets of Arizona, Florida and Pennsylvania.

These are limited licensing markets, which means that state regulators issue licenses to a few select cannabis companies. Establishing a strong presence in these markets will give Curaleaf a competitive advantage over its peers. Additionally, Arizona, which legalized recreational cannabis last year, is now a hot market. With the acquisition of Bloom Dispensaries completed in the first quarter, Curaleaf is trying to create a stronghold in the state.

Curaleaf believes its position in the New York and New Jersey markets will increase its revenue in the coming years (both states legalized recreational cannabis last year). Management views the New Jersey adult market as a promising market that could be worth $2.3 billion by 2026, according to BDSA projections. The company ended its quarter with $243 million in cash and $584 million in outstanding debt net of unamortized debt discounts.

The company’s management is confident that it will achieve its revenue targets of $1.4-1.5 billion in 2022, with an adjusted EBITDA margin of 28%.

High hopes of this pot stock

Although Curaleaf has not seen green in its results, it has always been profitable from an operational point of view. If this streak continues, it won’t be long before he starts reporting income. It is currently the most revenue-generating cannabis company in the United States. Peers Trulieve Cannabis and Green thumb Industries are catching up, with revenues of $1 billion and $941 million respectively for the last 12 months.

With a quality product portfolio and smart acquisitions (which have yet to show their full potential), Curaleaf is well positioned to maintain its position as the top pot contender in the US. In terms of global reach, last year it completed the acquisition and rebranding of Europe-based EMMAC Life Sciences Group into Curaleaf International. This acquisition gives Curaleaf access to “key medical cannabis markets including the UK, Germany, Italy, Spain and Portugal”.

This is impressive, as very few national operators have been able to expand into international markets. A frontrunner advantage will work in Curaleaf’s favor, as estimates show the European market could grow at a compound annual rate of 29.6% to reach $37 billion by 2027.

I think these factors have led analysts to predict a whopping 122% upside over the next 12 months for Curaleaf shares. Federal legalization or not, as long as state legalization continues, Curaleaf is poised to grow – it’s a hot buy with huge opportunities in the years to come.