The cannabis industry hasn't been full of growth lately. Many multi-state operators that previously delivered high growth numbers have been reporting flat sales numbers from one quarter to the next. Increasing competition and oversupply in some markets are just some of the big reasons why companies haven't been doing so well.
But with New Jersey recently commencing recreational adult-use sales, there could be some growth-driving catalysts out there. One company that's particularly bullish on the rest of the year is Curaleaf Holdings (CURLF +1.42%).
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Curaleaf's sales have been flat for multiple periods
As one of the top multi-state operators (MSOs) in the country with a presence in more than 20 states, growth normally hasn't been a problem for Curaleaf. Expanding into new markets has made it easy for the company's top line to expand. However, in recent periods, the company's quarter-over-quarter growth has come to a grinding halt:
CURLF Revenue (Quarterly) data by YCharts
Revenue for the first three months of 2022 was $313.1 million and was actually down more than 2% from the $320 million that Curaleaf reported in the previous period. And that's with the company opening 11 retail dispensaries during the period. Despite the growth in locations, Curaleaf still struggled to build off its fourth-quarter numbers. And the problem isn't exclusive to Curaleaf as other MSOs have faced similar challenges. Rival Green Thumb Industries reported revenue of $243 million for the same three-month period as its sales were flat from the previous period as well.
Management is optimistic about the remainder of the year
In a recent interview with Bloomberg, Curaleaf executive Boris Jordan said he believes that the "flatness" was over and that he sees "substantial growth" for the remainder of the year. March was a record month for the company, with the business achieving its highest growth rate ever.
Jordan specifically named New Jersey, Illinois, and Florida as markets that were showing encouraging numbers. In New Jersey, where the market will initially be undersupplied, Jordan projects that gross margin will be "well over" 80% of revenue. Not only will the new market bump up its sales this year, but it sounds as if it should also bolster the company's bottom line.
In Q1, Curaleaf's gross margin was around 49% and it reported adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $72.9 million, which was 23% of the top line. Margins haven't been a problem for Curaleaf, and the good news for investors is they're about to get even better.
Does this make Curaleaf a buy?
In the past 12 months, Curaleaf's stock has been on a steady decline, down 59%. Although that seems awful, it's actually better than the overall cannabis market as the Horizons Marijuana Life Sciences ETF has declined by 60%. And that's still not nearly as bad as other big-name pot stocks, including Canopy Growth and Tilray Brands, which have crashed by more than 70%.
OTC: CURLF
Key Data Points
General bearishness in the marijuana industry is to blame for much of Curaleaf's falling stock price. A lack of movement on federal legalization has made pot stocks less attractive to investors who may not be willing to wait around for the industry. But if you're willing to buy and hold, investing in the cannabis industry today could lead to some great profits down the road.
Curaleaf is a leading company in the sector that is on track to generate at least $1.4 billion in revenue this year. The company's bullish outlook and continued growth opportunities make this an incredibly promising stock to own right now. Jordan's recent comments give investors plenty of reasons to get excited about the stock. Some stronger earnings numbers later this year could result in some bullishness, which is long overdue.
