Stockchase Opinions

Brian Madden Curaleaf Holdings Inc CURA-CSE TRADE Apr 11, 2024

US rescheduling hasn't happened. Off peak. Fits and starts when there's news. Entrenched opposition. US firms can't deduct expenses like a "legitimate" business, so can't turn a profit. Trader's dream, but not for long term.

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Unspecified
This was dragged down with the Cannabis sector and delays in U.S. Cannabis legislation. Has good governance and should be one of the winners in this space. Long term growth is good but not so much short term. Chairman and founder owns $800 million in stock. He owns personally but not for clients.
PAST TOP PICK
(A Top Pick May 04/21, Down 59%) Derating of secular growth stocks due to rising interest rates. Doing all the right things. Delayed US legislative reform. A victim of the environment. Will be a dominant player in years to come.
COMMENT
A bit of a lottery ticket. Good job expanding in US, strong revenue growth, fairly good cash balance, growing organically. US regulatory environment has not improved. US investment firms won't hold cannabis while still illegal. Tide's gone out on the market. Future is promising, but he can't say when. Will be a leader long term. Investors must decide whether to hold or use tax-loss selling.
BUY
MJ-N down this week He has been long in cannabis. It's been a tough week. Most of this ETF is invested in Canadian stocks. Canopy this week just announced it would issue more shares, which will highly dilute shares. Canopy has been eroding capital quickly. A lot of consolidation needs to happen. The top 3-4 Canadian players are losing market share. Look to U.S. names, instead, where valuations are interesting. Names like Curaleaf are trading at low May 2020 valuations.
Unspecified
Cannabis stocks sold off in the U.S. with many companies burning through cash. Curaleaf should continue to be a leader with cash on the balance sheet and generating cash. It is still building its business. There are challenges in the Cannabis market in the U.S. at the moment. Waiting for more legalization legislation.
BUY
Allan Tong’s Discover Picks Despite inflation, Curaleaf’s Q2 was rosy with revenue growing 8% to $338 million and adjusted EBITDA rising 2.2% to 25.6% following -1.5% in Q1. Also, management lowered 2022 guidance by cutting capital spending by $25 million to $125 million. Caveats: There’s a lot of competition in any of these territories, so establishing a presence in all corners of the U.S. is crucial. Also, the path to legalization will be unpredictable, given the vagaries of American politics. You can buy Curaleaf now, but be patient. The ride up could take time, but it could soar into hyperspace any moment, too. Curaleaf boasts 10 buys and one hold at an average price target of $12.14, nearly 50% higher. Buy. Read 3 Cannabis Stocks to go Higher for our full analysis.
DON'T BUY
Getting more liberalization of cannabis laws state by state in US. Good for multi-state operators like this one. Well positioned. Elephant in room is federal tax laws, but tax relief won't be for a while.
DON'T BUY

He deals with 3- to 5-year money, holds it a long time, and rides the growth of the underlying business. Canadian marijuana space is at risk. US landscape is more fertile, better capitalized, better opportunities, and more upside, especially when the US legislation becomes law.

RISKY

Large issue with the company is legalizing the products(marijuana). Another worry is the over supply of products in the market. Federal laws against marijuana in USA make it hard to deal with expenses that are not deductible (100% tax rate). Could be a good investment if US legislation changes. In the meantime, would not recommend investing.