Is This Cannabis Stock a Better Buy Than Canopy Growth Corp (TSX:WEED)?

Curaleaf Holdings (CNSX:CURA) has a strong presence south of the border, but recent troubles with the FDA could derail the firm’s plans.

| More on:
Cannabis 2.0

Canopy Growth Corp (TSX:WEED)(NYSE:CGC) garners much of the attention directed at the marijuana industry, and there are excellent reasons for that.

Canopy is the largest cannabis company in the world by market cap, has one of the highest projected production capacities in the industry, and is one of about a handful of companies that have supply agreements with every province.

However, there are other pot firms to consider, and one that has been making quite a bit of noise in recent months is Curaleaf Holdings Inc (CNSX:CURA). 

Recent acquisitions 

Curaleaf recently made a big move by acquiring GR Companies for $875 million in cash and stock. GR Companies is headquartered in Chicago and possesses 61 dispensary licenses, and 17 cultivation and processing licenses.

Chicago is a particularly attractive market; the state of Illinois allows medical uses of marijuana and just became the latest US state to legalize recreational uses.

This deal — which was first announced in July and should close by 2020 — will improve Curaleaf’s already strong operations.  

Curaleaf made another major acquisition earlier in the year. Back in May, the company agreed to buy Portland-based Cura Partners in an all-stock deal worth $1.27 billion.

Curaleaf will hold a total of 131 dispensary licenses, 20 cultivation sites and 26 processing facilities across 19 US states once all these acquisitions close.

Having such a widespread presence in the U.S. could pay rich dividends down the road. As the stigma around cannabis evaporates before our eyes, and marijuana laws are increasingly being put under the microscope, sales and revenues in the sector will continue to grow exponentially. 

Curaleaf runs into some trouble

Back in March, the pharmacy chain CVS Health announced it would be selling some of Curaleaf’s products in about 800 stores across 8 states.

While that was good news for Curaleaf, the firm was recently scolded by the Food and Drug Administration (FDA). The FDA sent a warning letter to Joseph Lusardi, president of Curaleaf.

In the letter, the FDA alleged that Curaleaf had been selling unapproved drugs, several of which were “not generally recognized as safe and effective” for the uses for which Curaleaf advertised them.

The FDA gave Curaleaf 15 days to take “specific steps” to correct these violations. This warning from the FDA led to Curaleaf losing its partnership with CVS Health. 

This episode is a reminder of one of the biggest obstacles to marijuana firms operating in the U.S. Though the market is poised to continue growing, the strict laws and the relevant regulatory authorities pose a serious problem for firms looking to profit from it.

Cannabis companies essentially have to walk on eggshells to avoid stepping outside the bounds of the law.

While that is also true to some extent in Canada — as CannTrust Holdings Inc (TSX:TRST)(NYSE:CTST) recently found out the hard way — the Canadian landscape is currently less cutthroat from a legal standpoint. 

Should you buy?

Federal laws in the U.S. surrounding various strands of cannabis will likely continue to be an issue. However, Curaleaf is one of the top two or three dispensaries by the number of retail licenses held and the number of stores owned.

The firm also has a wider presence across the U.S. than any of its peers. Curaleaf is clearly one of the biggest players in its sector, and it might be worth considering purchasing its shares. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Prosper Bakiny has no position in any of the stocks mentioned.  

More on Cannabis Stocks

A cannabis plant grows.
Cannabis Stocks

TLRY Stock: Here’s What’s Coming in 2023

Tilray Inc. (TSX:TLRY) is geared up for big growth this decade and looks like one of the top cannabis stocks…

Read more »

A person holds a small glass jar of marijuana.
Cannabis Stocks

Canopy Growth Stock: Here’s What’s Coming in 2023

Canopy Growth stock has made a lot of new moves in the last few months, but where is the company…

Read more »

A cannabis plant grows.
Cannabis Stocks

Better Cannabis Buy: Canopy Growth Stock or Tilray?

Only two TSX weed stocks can deliver substantial returns in the highly anticipated growth of the global cannabis market.

Read more »

Medicinal research is conducted on cannabis.
Cannabis Stocks

Is Tilray Stock a Buy in January 2023?

Tilray stock has lost 50% of its value in the last 12 months, in line with its peers.

Read more »

Pot stocks are a riskier investment
Cannabis Stocks

Are Cannabis Stocks Still a Thing in 2023?

The whole question of whether cannabis stocks are still relevant in 2023 is an interesting one. Here's my take on…

Read more »

A cannabis plant grows.
Cannabis Stocks

Why Canopy Growth Stock Fell 72% Last Year

Canopy Growth stock is a beaten-up cannabis giant that is trading at a discount compared to historical multiples. But is…

Read more »

Cannabis grows at a commercial farm.
Cannabis Stocks

Is SNDL Stock a Buy in January 2023?

SNDL is among the worst-performing cannabis stocks in the last three years. But is SNDL stock a buy right now?

Read more »

a person watches a downward arrow crash through the floor
Cannabis Stocks

Why Tilray Stock Fell Almost 60% in 2022

Tilray is a Canadian cannabis stock that is down 93% from all-time highs. Let's see if TLRY stock is a…

Read more »