Suppose you asked cannabis investors last year about which stocks were likely to be huge winners in 2021. Which stocks would probably rank near the top of the list. My guess is that Curaleaf Holdings (CURLF 1.81%) would've been in the group. On the other hand, I doubt that many would have picked Sundial Growers (SNDL 15.88%).
The future is hard to accurately predict, though. Sundial Growers' shares have soared more than 170% year to date. Curaleaf is off to a good start, too, with the stock up more than 30%. Clearly, though, Sundial has been a much bigger winner so far this year.
But which of these marijuana stocks is the better pick now? Here's how Curaleaf and Sundial stack up against each other.
The case for Curaleaf
If bigger is better, Curaleaf trounces Sundial in nearly every important way. For one thing, Curaleaf's market cap of close to $11 billion makes it the biggest U.S. cannabis stock (and much larger than Canadian cannabis operator Sundial.)
Curaleaf isn't just the biggest U.S. multistate operator (MSO) based on market cap, though. It also boasts the highest revenue in the U.S. cannabis industry. In the fourth quarter of 2020, the company reported record sales of $230.3 million. That result more than tripled Curaleaf's revenue in the prior-year period and reflected strong 26% quarter-over-quarter growth.
The company isn't profitable yet, at least not based on International Financial Reporting Standards. However, Curaleaf's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) skyrocketed 289% year over year and 27% quarter over quarter in Q4 to $53.8 million.
It's fair to say that Curaleaf's opportunities are also bigger than Sundial's. The U.S. cannabis market is expected to more than double in size over the next five years. Curaleaf is in a great position to capitalize on that growth.
The MSO already has operations in 23 states. It claims a No. 1 market share in eight markets, notably including the medical cannabis markets in New Jersey and New York. These are especially important because New Jersey recently legalized recreational marijuana while New York seems likely to follow suit soon.
One thing holding Curaleaf back to some extent is that the company can't list its shares on a major U.S. stock exchange as long as marijuana is illegal at the federal level. There's a possibility, though, that cannabis reform legislation could remove that barrier in the not-too-distant future.
The case for Sundial Growers
Why consider buying Sundial Growers shares? Unlike Curaleaf, the stock trades on the Nasdaq stock exchange. As a result, it has more exposure to U.S. investors. Sundial even ranks as the most popular pot stock on the Robinhood trading platform.
More important, though, is the reason why Sundial gained its popularity. Many investors feel that the company's prospects have been underappreciated.
Sure, Sundial's revenue fell year over year in the fourth quarter of 2020, just as it did in Q3. However, investors liked several things in the company's Q4 update. For one thing, Sundial beat analysts' revenue estimates. It also made progress compared to the previous quarter.
Sundial thinks that its future will be even brighter. The company's cost reduction initiatives made last year appear to be paying off. It's now harvesting much higher potency cannabis flower, which could help win over more customers in the Canadian market.
The company is also looking to expand its horizons. Sundial and SunStream Bancorp recently teamed up to invest in cannabis companies that operate in Canada as well as those that operate in international markets.
Even with Sundial's impressive stock performance this year, the company's market cap is around $2.5 billion. If you subscribe to the theory that it's easier for smaller companies to grow faster, Sundial has a size advantage compared to Curaleaf.
Better marijuana stock?
It took me less time to decide between these two marijuana stocks than it takes for a New York City cab driver to honk the horn when a traffic light turns green. Curaleaf is the hands-down winner, in my view.
On every key front, Curaleaf comes out on top. It's growing much faster than Sundial. It has much better growth prospects as well. I think that there are other cannabis stocks that offer even better risk-reward propositions, but Curaleaf appears to still be a solid pick.