The recent dip in the performance of marijuana stocks shouldn't cause investors to abandon the sector altogether. This is an evolving industry that could touch new heights eventually. Whether there are any positive news over the federal legalization of marijuana or not, some of the domestic cannabis growers are capable of making investors rich this year.
One such company is Massachusetts-based Curaleaf Holdings (CURLF -2.56%). It is not profitable yet, but it is outshining its revenue and smart expansion strategies. In addition, the company made some timely acquisitions that played critical roles in its success until now. But what does 2022 have in store for this company? Let's take a look.
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2022 could be another excellent year for Curaleaf
This cannabis grower's aggressive acquisition strategies worked in its favor last year. In its third quarter of 2021, the company reported $317 million in revenue, a jump of 74% year over year. Its retail segment with 112 dispensaries drove the growth generating $224 million, or 71% of total revenue.
Some of the company's acquisitions in 2020 and 2021 are yet to show their full potential. Thus, investors can also expect a surge in revenue in fiscal 2022. Unlike its Canadian counterpart, Aurora Cannabis, Curaleaf didn't make the mistake of not keeping its balance sheet stable while going on its acquisition spree. The company ended the third quarter with $317 million in cash and $342 million in outstanding debt (net of unamortized debt discounts).
From just $19 million in revenue in fiscal 2017 to nearly $1 billion in revenue in fiscal 2021 (based on the current guidance for the full year), Curaleaf has come a long way.
Note that the company grew its revenue just from the limited number of states that allow the sale of medical/recreational marijuana. Its surge in revenue also brought in adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) of $71 million, versus $42 million in the year-ago quarter.
The company isn't profitable yet, but this level of dramatic revenue growth is getting it closer to generating profits. It is also aggressively expanding in key cannabis markets like Arizona (which recently legalized recreational marijuana), where it opened its ninth dispensary. It was also wise of Curaleaf to strengthen its footprint in the state by acquiring Bloom Dispensaries. This acquisition increased its store count to 16 in Arizona and 128 nationwide.
While many of the domestic growers revised their full-year guidance, believing some headwinds could pose a challenge, Curaleaf is confident it will achieve its revenue forecast. It expects revenue to cross $1 billion for the year, coming in at the lower end of the range of $1.2 billion to $1.3 billion. This could also move the company closer to achieving profitability this fiscal year.
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Skyrocket or crash in 2022?
Wall Street analysts, on average, predict the stock could gain 125% in the next 12 months, which I believe is possible.
The ramp-up of state legalization and any positive news of federal legalization legislation could make the stock skyrocket this year. Industry experts predict close to seven states could legalize marijuana in 2022. The company already has a presence in 23 U.S. states. Curaleaf can also take advantage of its presence in the burgeoning European market, which could grow at a compound annual rate of 29.6% through 2027 to $37 billion.
Curaleaf has achieved this astounding success even with a limited legal market, and so one could imagine the growth prospects the company has potential access to more state markets. While there's no timeline or certainty over the federal legalization of marijuana, should that happen, Curaleaf could end up becoming one of the top players in the domestic market. But when that happens, the stock could be too expensive to buy, so why not take advantage of its current price? With shares currently trading 53% below their 52-week high, now would be the right time to invest in this impressive growth stock.
