The cannabis industry’s changing legal landscape in the United States and the growing awareness surrounding the medicinal benefits of marijuana have created a favorable backdrop for companies operating in this space. Because cannabis-based medicines are now being widely recognized as viable treatment options for people suffering from chronic pain or seizures, the industry’s sales are expected to increase this year and beyond.
The cannabis market is anticipated to reach $70.6 billion by 2028, growing at a 26.7% CAGR. With more states legalizing the use and sale of recreational marijuana, cannabis producers’ addressable market continues to grow. In addition, cannabis’ potential decriminalization at the federal level could be a massive opportunity for industry players because it would afford them access to some of the world’s largest investors.
Given this backdrop, we think fundamentally strong cannabis stocks Curaleaf Holdings Inc. (CURLF), Turalieve Cannabis Corp. (TCNNF), and Ayr Wellness Inc. (AYRWF) are well-positioned to capitalize on the industry tailwinds and gain significantly in the near term.
Click here to check out our Cannabis Industry Report for 2021
Curaleaf Holdings Inc. (CURLF)
CURLF in Wakefield, Mass., is a medicinal and wellness cannabis company. Cannabis Operations and Non-Cannabis Operations are the company’s two operational segments. It operated 109 dispensaries, 22 cultivation sites, and 30 processing sites in 23 states as of August 25, 2021.
Last month, CURLF opened its Curaleaf Bordentown dispensary, the company's 109th dispensary nationwide. It also launched its Select brand in New Jersey, expanding the brand's reach to 19 states.
During the second quarter, ended June 30, 2021, CURLF’s revenue increased 165.8% year-over-year to $312.21 million. The company’s operating income increased 139.2% year-over-year to $51.89 million over this period. Its gross profit increased 127.1% year-over-year to $184.50 million, while its adjusted EBITDA grew 34.7% from the prior-year quarter to $84.37 million.
The company’s EPS is expected to grow 45.1% year-over-year to $7.95 in its fiscal year 2021. In addition, its revenue is expected to increase 29.3% in the current year. The stock has gained 58.8% in price over the past year.
Nine Wall Street analysts have provided ratings for the stock, and all have rated it Buy. Closing yesterday’s trading session at $11.5, the average analyst price target of $22.7 represents a potential 97.4% upside.
Turalieve Cannabis Corp. (TCNNF)
TCNNF operates as a medical cannabis company. It cultivates and manufactures its products in-house and distributes them through Trulieve branded stores in Florida, California, Massachusetts, Connecticut, Pennsylvania, and West Virginia and to patients directly via home delivery. The company had 100 dispensaries as of August 25, 2021, including 90 in Florida.
This month, TCNNF released a new range of high-quality cannabis concentrates derived via hydrocarbon extraction. Live Resin, the first product in Trulieve's new hydrocarbon line, is a high-terpene, single-source extract.
TCNNF’s revenue increased 78.1% year-over-year to $215.1 million in the second quarter ended June 30, 2021. Its gross profit grew 59.6% from its year-ago value to $144.5 million. The company’s net income surged 116% from the prior-year quarter to $40.9 million, while its adjusted EBITDA increased 55% year-over-year to $94.9 over this period.
A $1.17 consensus EPS estimate for the current year represents a 120.8% improvement year-over-year. Likewise, the $901.92 million consensus revenue estimate for 2021 represents a 72.9% increase from the same period last year. The stock has gained 32.1% over the past year.
All five analysts that provided ratings for the stock rated it Buy. The $61.22 consensus price target represents a 126.5% potential gain from its $27.03 last closing price.
Ayr Wellness Inc. (AYRWF)
AYRWF in New York City is a multi-state vertically integrated cannabis company that cultivates, extracts, produces, distributes, and retails cannabis products and branded cannabis packaged goods. In addition, it assists authorized cannabis companies with administrative, consulting, and operational support.
This month, through a wholly owned subsidiary, AYRWF acquired 100% of the membership interests of GSD NJ LLC, one of 12 existing vertical permit holders in the State of New Jersey and one of the state’s original six alternative treatment centers. Through this acquisition, the company intends to serve the New Jersey cannabis market, which has a high population and a noted demand for cannabis.
Also, this month, AYRWF announced that it had reached a formal agreement to purchase Cultivauna, LLC, the owner of Levia branded cannabis-infused seltzers and water-soluble tinctures. According to the company, Levia’s unique formula, which provides great flavor and zero calories in an infused beverage experience, has enormous potential as an alcohol alternative.
For the second quarter, ended June 30, 2021, AYRWF’s revenue increased 222% year-over-year to $91.3 million. Its gross profit grew 30.2% year-over-year to $22.31 million over this period. The company’s adjusted EBITDA surged 225% from its year-ago value to $27.4 million.
AYRWF is expected to generate 141.1% revenue growth year-over-year to $373.95 million next year. Its EPS is estimated to increase by 90% in the current year. AYRWF's stock has gained 82.3% in price over the past year and 8.3% over the past nine months.
All four Wall Street analysts that provided ratings for the stock rated it a Buy. Currently trading at $23.3, the average analyst price target of $54.99 represents a 136% potential upside.
Click here to check out our Cannabis Industry Report for 2021
CURLF shares were trading at $11.20 per share on Friday morning, down $0.30 (-2.61%). Year-to-date, CURLF has declined -6.45%, versus a 19.13% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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