Don’t sell a cannabis recovery

U.S. cannabis giant Curaleaf was just getting started

Andrew Willis 27 May, 2020 | 1:52AM
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Andrew Willis: Last Monday, Curaleaf (CURA) came out with record earnings for the first quarter. And then, the stock sold off.

Now, this could be a classic case of ‘selling the news’. The stock gained right up to the earnings report, it met expectations, and then profits were taken. But this time, if you were selling, you may find yourself scrambling to get back in.

Sector analyst Kristoffer Inton says that Curaleaf isn’t stopping, with management rolling out into seven additional states by year-end. At 19 we’re nearing half the country. With 20 cultivation sites, 26 processing sites, and 131 dispensary licences, the company is full steam ahead. All while continuing to invest within its product line, and existing markets.

Cannabis stocks suffered greatly in the recent crisis, but many losses may not have been warranted. This company’s revenues were up around a quarter, in the space of a quarter. And their margins? Almost half. Now there are (or were) concerns about business being hurt by the coronavirus. But Inton sees the threat as interim and modest. Cannabis is an essential service, and Curaleaf already has medical patient distribution and curbside pickup covered. The stock is still a pure-play for what is still set to be the largest and fastest-growing cannabis market in the world.

For Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Curaleaf Holdings Inc7.62 CAD-1.30Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar Canada. He previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @Andrew_M_Willis.

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