Cannabis stocks have been hard hit by the broader market weakness in 2022, as evident from AdvisorShares Pure Cannabis ETF’s (YOLO) 17% decline year-to-date. The delay in the federal legalization of marijuana has also contributed to the bearish sentiment surrounding the industry.
However, many regulators have been working on legalizing marijuana in the U.S. soon, with Senator Chuck Schumer gearing up to introduce the Cannabis Administration and Opportunity Act (CAOA) bill this year. Congress is expected to announce marijuana reforms this spring, with both Democrats and Republicans backing the legalization of cannabis use in the country. Currently legal in 18 states and decriminalized in 13 more, cannabis sales are expected to surpass $28.30 billion in 2022.
Given these factors, Wall Street analysts expect cannabis stocks Curaleaf Holding, Inc. (CURLF), Trulieve Cannabis Corp. (TCNNF), Sundial Growers Inc. (SNDL), and HEXO Corp. (HEXO) to more than double.
Curaleaf Holding, Inc. (CURLF)
CURLF is a leading cannabis operator in the U.S. The company operates in two segments: Cannabis Operations; and Non-Cannabis Operations. The Cannabis Operations segment engages in the production and sale of cannabis through retail and wholesale channels. The Non-Cannabis Operations segment engages in professional services such as licensing, real-estate leasing, and more.
Last month, CURLF announced its plans to open two new dispensaries in Pennsylvania and two new Florida dispensaries in Tampa Bay and Largo. This expansion is expected to increase the company’s retail footprint up to 125 dispensaries across the country. This should increase CURLF’s customer base and boost sales.
Last month, CURLF completed the acquisition of vertically integrated cannabis operator Bloom Dispensaries for $211 million. This acquisition expands CURLF’s retail footprint in Arizona, thereby allowing it to capitalize on the state’s more than $1.40 billion annual market opportunity.
CURLF’s total revenue increased 73.9% year-over-year to $317.13 million in the fiscal third quarter ended September 30, 2021. CURLF’s gross profit on cannabis sales grew 61% year-over-year to $144.37 million. The company’s adjusted EBITDA improved 68.8% year-over-year to $71.36 million.
The consensus revenue estimate of $325.80 million for the fiscal fourth quarter ended December 31, 2021, represents a 41.5% year-over-year growth from the same period last year. Analysts expect the company’s EPS to rise 44% year-over-year in the about-to-be reported quarter. The company has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has declined 17% year-to-date.
Of the 11 Wall Street analysts that rated CURLF, nine rated it Buy, while two rated it Hold. The 12-month median price target of $18.49 indicates 148% potential upside. The price targets range from a low of $11.50 to a high of $24.38.
Trulieve Cannabis Corp. (TCNNF)
TCNNF is a medical cannabis company in the U.S. The company cultivates, produces cannabis products in-house, and distributes to dispensaries in Florida, California, Massachusetts, Connecticut, Pennsylvania, and West Virginia. It operates more than 111 dispensaries.
On January 28, TCNNF closed the second tranche of 8% senior secured notes due 2026 for gross proceeds of $75 million. The company raised a total of $425 million in gross proceeds from the first and second tranches. This funding is expected to allow the company to execute its strategic initiatives this year and fund its capital expenditures and other corporate expenses.
On January 27, TCNNF announced a partnership with Miami Mango, a South Florida-based cannabis company. Miami Mango’s popular Mango Haze will be the first strain launched exclusively to TCNNF’s medical patients in the South Florida market. This is expected to provide quality products to Florida’s medical cannabis market and boost the company’s revenues.
In the fiscal 2021 third quarter ended September 30, TCNNF’s total revenue increased 64.4% year-over-year to $224.10 million. TCNNF’s gross profit increased 50.6% year-over-year to $153.90 million. The company’s adjusted EBITDA rose 42.6% from the same period last year to $98 million. TCNNF’s net income increased 6.9% from the year-ago value to $18.60 million.
Analysts expect TCNNF’s revenue for the fiscal fourth quarter ended December 2021 to come in at $326.91 million, representing a 94.1% rise year-over-year.
TCNNF has declined 19% year-to-date. However, each of the six Wall Street analysts that rated TCNNF rated it Strong Buy. The 12-month median price target of $56.95 indicates a 170% potential upside.
Sundial Growers Inc. (SNDL)
SNDL produces and markets cannabis products for the adult-use market in Canada. It cultivates and produces inhalable products, such as flower, vapes, and pre-rolls. The company markets and offers its products under the Top Leaf, Palmetto, Sundial Cannabis, and Grasslands brands. It is headquartered in Calgary, Canada.
This January, Sunstream Opportunities LP, a joint venture sponsored by SNDL, was assigned an investment grade rating of BBB+. "The investment grade credit rating assigned from Egan-Jones is a testament to the strong track record of Sunstream Opportunities LP's existing credit portfolio, which comprises over C$375 million of investments thus far," said Zach George, CEO of Sundial.
This January, SNDL and Alcanna Inc. amended their acquisition agreement dated October 7, 2021, from an all-share transaction to a cash and share consideration. Under this revised consideration, Alcanna shareholders will receive 8.85 common shares of SNDL for each Alcanna share held and $1.50 in cash consideration.
In the fiscal 2021 third quarter ended September 30, SNDL’s net revenue increased 11.7% year-over-year to C$14.37 million ($11.29 million). SNDL’s gross margin increased 109.1% year-over-year to C$1.78 million ($1.40 million). The company’s net income rose 115.8% from the same period last year to C$11.31 million ($8.89 million). The company’s net income per common share attributable to SNDL increased 100.9% from the year-ago value to C$0.005.
The consensus revenue estimate of $19.96 million for the fiscal fourth quarter ended December 2021 represents an 80.3% year-over-year growth from the same period last year. Street expects SNDL’s EPS to improve 85.1% year-over-year in the about-to-be-reported quarter.
SNDL declined 17% year-to-date. Of the two Wall Street analysts that rated SNDL, two rated it Hold. The 12-month median price target of $0.94 indicates a 95% potential upside. The price targets range from a low of $0.90 to a high of $0.97.
CURLF shares were trading at $7.49 per share on Tuesday afternoon, up $0.24 (+3.31%). Year-to-date, CURLF has declined -16.78%, versus a -5.14% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
3 Beaten-Down Cannabis Stocks That Will More Than Double, According to Wall Street StockNews.com
