Curaleaf (CURLF -4.30%) is one of the leaders in the American cannabis industry, serving as a leading medical and recreational marijuana dispensary in 19 states. But in the last six months alone its share prices have crashed by 49%, leaving shareholders in the lurch, much like their experience with other marijuana businesses over the last couple of years.

So is this stock on track for more losses, or is its rebound about to begin? Let's dive in and investigate.

This business has been busy

Curaleaf has big plans for the U.S. market, where it aspires to cement its status as one of the more functional players while penetrating deeper in areas where it sees the most growth. 

Its fourth-quarter results seem to paint a mixed picture of the company's health. Its revenue rose 14% year-over-year, reaching $352 million, which was likely a result of it opening 28 new stores and launching around 171 new product lines of cannabis. But for 2022, its gross profit was $579 million, barely changed from 2021's haul of $569 million, and its gross margin was only 22%. It's clear that its margin is under heavy pressure, as it hasn't widened since Q1 of 2022. Low cannabis prices in the U.S. caused by the oversaturated market are likely to blame.

Right now Curaleaf has $163 million in cash, and it burned $131 million last year, most of which went to acquisitions. In the fourth quarter, it purchased a smaller competitor called Tryke Companies, giving it access to cultivation, manufacturing, and retail facilities in Utah, Nevada, and Arizona. In the long term, those markets could grow enough to be important contributors to its sales. But that's where Curaleaf's strategy starts to look a bit muddled. 

While spending big on acquisitions and opening new stores in Florida and Connecticut, it also announced that it was going to start slashing costs by exiting the markets of California, Colorado, and Oregon. Management says that the cuts will save it $60 million per year. Notably, those states have had a legal cannabis industry for quite some time, which might mean that the company is struggling to compete in crowded markets with established players. Astute investors will appreciate that a failure to compete in a crowded market despite having considerable financial resources is a surefire sign that this company lacks any kind of competitive advantages like branding power or low-cost production methods. If it had those things, it would've been able to buy out the less-capable competition rather than be forced to make an exit from large markets. 

When paired with management's contention that Curaleaf's branded products are among the most widely distributed in the U.S., things look a bit gloomier. If its brands can't profitably compete where there's actual competition, it doesn't bode well for the future, when competitors will doubtlessly try to enter the markets it retreated to. And distributing widely and unprofitably without strong drivers to generate customer loyalty just ends up burning money in the short term as well as in the long term. 

For the record, management claims that building out its brands and its national platform is the business' top priority. But so far there isn't much evidence that that's working, or that progress is happening, and it could be a problem in the future.

This is a fairly steady ship in stormy waters

Given the above, investors might get the idea that it's a tad silly to think of buying Curaleaf stock at the moment. It's true that the company's long-term ability to protect its market share is questionable at best, even as it's trying to expand its footprint and penetrate its most promising markets in the near term. Still, in the context of a swamped-with-supply marijuana market and serious economic instability, not to mention ongoing delays with marijuana legalization and cannabis banking regulations, it isn't doing half bad. The company simply hasn't seen its sales collapse like some of its peers. 

Profitability remains far off. But investors who buy it soon will see likely their shares gain in value as progress is made toward profitability, which might take another couple of years. On the other hand, the market really does not like cannabis stocks at all right now, which makes the risk of buying for the purpose of a long-term hold significantly larger than what most investors should be comfortable with. 

You probably shouldn't invest in Curaleaf unless you can stomach serious losses. And even if you're comfortable with taking a big risk, there isn't anything super compelling about its trajectory to get excited about right now. While that could easily change over the coming quarters, especially if some of its marijuana brands gain traction among its customers, there simply isn't enough to get excited about. So keep an eye on its earnings releases to look for signs of momentum starting to build, but leave it on the shelf for now.