A lot of activity has been witnessed within the cannabis sector over the past few months and its repercussions on the sector has been varied. Pot stocks towards the end of 2018 suffered continued declines in price. This trend, however, seems to be reversing as stocks continue to soar at different rates.
Curaleaf Holdings Inc (OTCMKTS:CURLF) is one stock that is soaring recently. The firm, which is currently eyeing dominance within the cannabis space, has been among the cannabis firms which have recorded the highest growth rates in the sector, beating competitors by a significant margin. Its continued expansionary outlook has led different analysts and investors to forecast a steep increment in its operational capacity and consequently in its share price going forward. The result of this has been a surge in their share price.
As earlier stated, the months of November and December saw the share price of most companies (including Curaleaf) decline significantly. This was driven by significant turbulence which was witnessed in the cannabis sector. The result was a price decline from $10 per share to lows of $4 per share as seen below:
Over the past two months, however, the share price has quickly been recovering. The market has witnessed a near 100% increment in its price as it has risen from the $4 mark to its current price of $7.56. Given the momentum experienced, analysts continue to forecast that more is expected of CURLF and that the 100% increment will actually be achieved.
In this piece, we look at the firm, diving specifically into the catalysts which we believe will drive the stock to its new highs. Before going into the intricacies, however, let us have a look at the firm’s history and growth trajectory for the sake of first-time readers.
History of CURLF
Curaleaf Holdings Inc was founded back in 2010 and its headquarters set up in Wakefield, Massachusetts. Its inception came at a time when the cannabis wave had begun rocking the United States (by then, the medical marijuana market was beginning to take root) and management hoped to cash in on it by operating across the value chain.
The firm was therefore, set up to operate within the integrated medical and wellness cannabis segment within the United States. In order to benefit from value chain integration, the firm cultivates, processes and markets different cannabis products including pods, dry herbs, pre-rolls and flower pods, flower, edibles, capsules, lozenges, tinctures, concentrates for vaporising and vaporizer cartridges. To add on to this, the firm also provides services to licensed operators on ways to grow their value chain. These include the fields of cultivation, production and retailing cannabis.
Over time, the firm has grown its operating capacities, growing to 39, 12 and 10 dispensaries, cultivation and processing sites (covering 65,000 square feet) respectively within 12 states across the United States. While this growth has been great for them, management has maintained its focus on reaching over 1 million square feet by 2020.
A lot has happened since our last review of CURLF (which can be read here). However, two things stand out the most and these are discussed below.
CEO’s Outlook: Targeting the Black Market
It is true that Curaleaf is arguably one of the largest operators in the cannabis space. Its multistate presence coupled its diverse product line have allowed the firm’s brand (which is on an expansionary strategy) to grow throughout the country.
The firm’s CEO, Joseph Lusardi, during a chat with Investor Alan Brochstein spoke to his view of the firm and their outlook. He was quick to state that CURLF had witnessed massive growth in the previous quarters, a factor which he stated was pegged on the firm’s expansionary strategy as well as their focus on sticking to a cohesive brand. He added that in the coming future, the company’s brand will end up being a significant factor when comparing products as consumers will purchase from brands which they believe in. Furthermore, he noted that the market will turn to precision dosing especially so given the intense research going into cannabis and its medical benefits. To quote his own words:
”Bioavailability is going to become more important in order to differentiate products and effects and meet the needs of a broader consumer base… precision dosing and lesser-known cannabinoids are also topics of discussion in terms of the future of the industry.”
While this provided an outlook into the future, Lusardi also pointed out important statistics which govern the current market. Presently, the total cannabis market is valued at $50 billion. However, only $10 billion is sold legally, leaving out $40 billion to the black market. With only 20% of the cannabis market having been mainstreamed, Lusardi believes that the goal CURLF should be seeking to achieve should border on growing their reach and tapping into the unreached black market. Eventually, this will help the firm grow into an unreached market portion and will have significant consequences on their market share.
With new laws coming into force, the eased cannabis prices will eventually aid in ensuring that this market is eventually reached.
As previously stated, CURLF has been on a growth pace. The firm has continued to implement some of the targets it had previously set such as reaching 69 outlets within the United States by the end of 2019 and 71 by 2020 as well as growing its operational field to 1 million square feet by 2020, up from its current 650,000 square feet. In doing so, the firm expects to clock in about 290,000 pounds of cannabis due to the extra production capacity.
The aggressive nature of this strategy has led them to bring in additional staff who can help in its implementation. These include Neil Davidson and Todd Goffman who come in as the Chief Financial Officer and General Counsel and Secretary respectively. Furthermore, there were also Peter Clateman and Jonathan Faucher who came in as Executive Vice Presidents for Business Development and Finance respectively. While the former duo came into the board, the latter will be focusing mainly on the growth strategy of the firm, specifically on business development and M&A strategies.
With the growth trajectory the firm has opted to take, there is a lot which is expected to go into it. As such, with the new (right) team in place, execution of their strategy – in line with their CEO’s outlook – will soon be achieved and consequently, so will growth.
The firm posted among the highest growths in revenue in its sector. Over the first three quarters of 2018, their revenue grew by 247% from 13 million to 45.1 million. This was a significant increment as its competitors recorded significantly lower increments, with Planet 13 Holdings recording the highest increment of 130.2%.
While the firm recorded a loss of $40.8 million during the period, its key indicators (the top lines) were strong enough to propel investors to stake their money with them. Moreover, with efforts being placed on cost cutting, the growing revenues will soon act as the basis for the similarly growing profits.
The aggressive expansionary strategy adopted by CURLF has seen them rise steadily over the last quarter, both financially and operationally. There is a lot which the firm is currently looking to achieve. Their growth strategy currently seems to be one step from being actualized and this is pegged on its successful execution. Therefore, with the right framework and people in place, as is currently the case, growth is imminent for Curaleaf.
We will be updating our subscribers as soon as we know more. For the latest updates on CURLF, sign up below!
Disclosure: We have no position in CURLF and have not been compensated for this article.