Marijuana stocks have been on a downward trend for the past couple of months, mostly because of a lack of positive movement toward U.S. federal legalization. But that doesn't change the fact that some of the domestic multistate players (MSO)s are excellent growth stocks that could bring huge returns once the industry matures.
One such company is Massachusetts-based Curaleaf Holdings (CURLF 2.70%), which is outshining its peers. Curaleaf proved yet again how capable it is with its strong end to 2021. Let's take a look at its fourth-quarter results and determine why now is the best time to buy this pot stock.
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Smart and timely growth strategies
It is important for an evolving company's management to adopt smart growth strategies without wasting money. We saw what happened with wildly popular Canadian pot company Aurora Cannabis. Driven by the rise in pot demand, Aurora went on a haphazard acquisition spree and burdened its balance sheet -- the effect of which the company is still bearing.
Curaleaf also made a lot of acquisitions in the last two years, but those were timely and strategically planned. Some of them include various cannabis products, manufacturers, and dispensaries -- like Select, Curaleaf NJ, Arrow, MEOT, Remedy, Blue Kudu, Alternative Therapies Group, Grassroots, and more -- that have worked in its favor. In its fourth quarter, revenue jumped 39% year over year to $320 million. For the full year, total revenue surged a whopping 93% to $1.2 billion.
The company has been profiting from these acquisitions, but some have yet to show their full potential. In the fourth quarter alone, Curaleaf entered into agreements to acquire another MSO, Tryke Companies, and Natural Remedy Patient Center. The company ended the year with a total of 117 dispensaries.
Curaleaf has also started 2022 on a strong note. The company opened many new dispensaries this year, bringing its total to 126 as of March 3.
Closer to profitability than ever
Despite having a remarkable growth in revenue, Curaleaf is not profitable yet. The company saw a 48% year-over-year growth in Q4 adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) to $80 million. For the full year, adjusted EBITDA jumped 107% to $298 million.
Peer Trulieve Cannabis acquired Harvest Health last year, while Cresco Labs recently announced the acquisition of New York-based MSO Columbia Care.
Now that these two have some strong cannabis companies in their portfolio, the pressure is more on Curaleaf to achieve profitability. The company has earned $1.2 billion in revenue over the trailing 12 months compared to Trulieve's $938 million and Cresco's $821 million, respectively.
From just $19 million in revenue in fiscal 2017 to $1.2 billion in 2021, Curaleaf has come a long way. I believe it won't be long before Curaleaf sees green in its bottom line. The company ended the year with $299 million in cash and $436 million in outstanding debt (net of unamortized debt discounts).
International exposure
Very few domestic MSOs have been able to expand to the international markets, the European market in particular. Experts predict this market could grow at a compound annual rate of 29.6% through 2027 to $37 billion.
After establishing a solid footprint in the United States with 126 stores, Curaleaf is spreading its roots to the European market. Last year, it completed the acquisition of EMMAC Life Sciences Group, also completing its successful rebranding to Curaleaf International. This acquisition gives Curaleaf access to "key medical cannabis markets, including the UK, Germany, Italy, Spain, and Portugal."
While the company has shown that it can do wonders even in a limited market, if and when legalization happens, more opportunities will arise for Curaleaf in the U.S. Should that happen, the stock will get more expensive.
Market pessimism, due to a lack of movement toward positive cannabis reforms, has affected marijuana stock prices. But Wall Street analysts are optimistic about pot stocks and see upsides of 125% for this MSO in the next 12 months. Curaleaf's stock is trading more than 50% below its 52-week high of $15.47 now. That makes now is the right time to buy onthe dip and hold it for the long haul.
