The cannabis industry’s changing legal landscape in the United States, which is highlighting the medicinal benefits of cannabidiol products, has been creating a favorable backdrop for cannabis companies. The legalization of recreational marijuana is slowly eking out victories on a state-by-state basis.
As of April 2021, 35 states and the District of Columbia had legalized marijuana for medical use. Sixteen of these states also allow adults to legally use marijuana for recreational purposes. In fact, there is now a growing acceptance of the plant as a legitimate option for patients suffering from chronic pain or seizures. The cannabis market is estimated to grow at a 28% CAGR over the next five years to hit $90.4 billion.
Senate Majority Leader Chuck Schumer said last month that he hopes to see an end to the drug’s prohibition by next year’s 4/20. This has given Wall Street analysts more confidence about the performance of financially sound American cannabis stocks Curaleaf Holdings, Inc. (CURLF) and Green Thumb Industries Inc. (GTBIF).
Curaleaf Holdings, Inc. (CURLF)
CURLF is a leading international provider of cannabis consumer products. The company’s Cannabis Operations segment produces and sells cannabis through retail and wholesale channels, while its Non-Cannabis Operations segment provides cultivation and processing. As of March 9, CURLF operated 101 dispensaries, 23 cultivation sites, and 30 processing sites.
This month, CURLF acquired Los Sueños Farms, the largest outdoor cannabis grower in Colorado, and its related entities. The transaction will include three Pueblo, Colorado outdoor cannabis grow facilities covering 66 acres of cultivation capacity, an 1,800-plant indoor grow and two retail cannabis dispensary locations serving adult use customers. The acquisition should significantly expand CURLF’s presence in the Colorado cannabis market and ultimately boost its sales.
CURLF’s net revenue grew by 169.8% year-over-year to $260.32 million in the first quarter, ended March 31, 2021. Its retail revenue grew 231.4% year-over-year, while its wholesale revenue increased 253.6% year-over-year. The company reported a $140.81 million gross profit, representing a 107% increase year-over-year. Its adjusted EBITDA increased 213% year-over-year to $62.63 million.
Analysts expect CURLF’s revenue to increase 107.3% to $1.30 billion in the fiscal period ending December 31, 2021. The company’s EPS is expected to increase 152% year-over-year to $0.21 in the fiscal period ending December 31, 2022. The stock has gained 144.7% over the past year.
Of the nine Wall Street analysts that have provided ratings for the stock, all rated it Buy. Closing yesterday’s trading session at $14.70, the $23.52 average analyst price target represents a potential 60% upside.
Green Thumb Industries Inc. (GTBIF)
GTBIF is a manufacturer and seller of medical and adult-use cannabis in the United States. It is also a retailer and owner of Rise Dispensaries. The company manufactures and distributes a portfolio of branded cannabis products that include Beboe, Dogwalkers, Dr. Solomon’s, Incredibles, Rythm and The Feel Collection. GTBIF has 13 manufacturing facilities, licenses for 97 retail locations and operations across 12 U.S. markets.
This month, GTBIF entered the Virginia cannabis market by signing an agreement to acquire 100% of Dharma Pharmaceuticals LLC, including an existing production facility and retail dispensary. Not only will this help GTBIF increase its market base, but it will also allow it to serve Virginia’s patients and consumers and showcase the positive impact that the legal cannabis industry can have on local communities.
The company’s total revenue increased 89.5% year-over-year to $194.4 million for the first quarter, ended March 31. Its adjusted operating EBITDA grew 179.3% from its year-ago value to $71.4 million. GTBIF reported $10.4 million in net income, indicating a 347.6% increase year-over-year. The company’s EPS came in at $0.05, compared with the prior-year quarter EPS of $0.02.
GTBIF is expected to generate 57.2% revenue growth year-over-year to $875.12 million in the current year, whereas its EPS is expected to grow 442.9% from the year-ago value to $0.38 in the current year. The stock has gained 203.3% over the past year.
All 12 analysts that rated the stock have rated it Buy. A $48.06 consensus price target represents a 64.3% potential gain from its last closing price of $29.25.
CURLF shares were trading at $14.63 per share on Wednesday afternoon, down $0.07 (-0.47%). Year-to-date, CURLF has gained 22.20%, versus a 12.47% rise in the benchmark S&P 500 index during the same period.
About the Author: Samiksha Agarwal
Samiksha Agarwal has always had a keen interest in financial markets. This has led her to a career as a financial journalist. Through her extensive knowledge of fundamental analysis, her goal is to help investors identify untapped investment opportunities in the stock market. More…