Cannabis stocks have been volatile over the last year, and that's saying something for a sector notorious for boom-bust cycles that closely follow the news. Among the latest headlines have been acquisitions by Curaleaf (CURLF), whose stock looks like one of the best cannabis-sector buys now.
Year-to-date, CURLF is up almost 22 percent, while Aurora Cannabis stock is up 11.7 percent and Cronos is up 28 percent. Although CURLF stock is 20.6 percent below its 52-week high, other cannabis stocks have seen even bigger drops.
Curaleaf stock is a good bet on the cannabis industry
Curaleaf has been growing quickly, both organically and inorganically. The company has completed its acquisition of EMMAC Life Sciences, which gives it a foothold in Europe. It has also recently secured $130 million in funding from a single strategic investor for Curaleaf International.
The largest cannabis company
In the first quarter of 2021, Curaleaf reported adjusted EBITDA of $62.6 million and revenue of $260.3 million, bringing its annualized revenue to over $1 billion—a significant achievement. Whereas most other cannabis companies are posting losses, CURLF has healthy EBITDA margins.
The company’s revenue and adjusted EBITDA have risen sequentially for the last two years, and the company’s balance sheet looks strong. At the end of Mar. 2021, it had a total debt of $340 million and cash of $315 million.
The company sees a massive total addressable market for itself, valuing the total U.S. cannabis market at $100 billion (including the $17.5 billion legal cannabis market). The bulk of cannabis sales are still illegal, but things might change with the federal legalization of adult-use cannabis. Curaleaf has been also been expanding. On Jun. 24, it opened a new dispensary in New Jersey—its second in the state and 107th in the country.
Earlier in Jun3, CURLF announced a partnership with its Select brand and Rolling Stone magazine. The company is also expanding in Europe, and recently launched a brand in Germany.
CURLF stock looks undervalued
CURLF currently has a NTM (next-12 month) EV (enterprise value)-to-revenue multiple of 7.2x. Its average multiple since going public is 7.6x, with a high of 19.2x and a low of 2.6x. In contrast, ACB's NTM EV-to-sales multiple is 8.6x, and Tilray's is 11x. Meanwhile, CURLF'sn NTM EV-to-EBITDA of only 23.6x looks very attractive.
CURLF stock's forecast looks promising
Analysts are bullish on CURLF, and their average 12-month target price of $22.50 for the stock implies a 54 percent upside, according to MarketBeat. Eight analysts recommend “buy” and one recommends “hold.”
Could Reddit traders target CURLF stock?
Traders on Reddit group WallStreetBets targeted Tilray stock in Q1 2021, boosting the stock. Given CURLF's strong growth outlook, tepid valuation, and high short interest, it may also become a Reddit target. According to Fintel, on Jun. 28, CURLF had a short volume ratio of 47 percent, which looks high enough to trigger a squeeze.
To sum up, CURLF looks like one of the best cannabis stocks to buy now and has a reasonable safety margin, unlike most of its peers. You may want to get in before a Reddit short squeeze.