The recent buzz around U.S. legalization has created a favourable environment for cannabis stocks. That said, cannabis stocks have not performed in sync of late. Some have done better than others. And investors will note that U.S. MSOs like Curaleaf Holdings (TSXV:CURA) have outperformed to a greater degree than their Canadian counterparts.
I think this is warranted. Additionally, I think this momentum is likely to continue.
Here’s why I think Curaleaf is the top cannabis pick investors should focus on right now.
Legalization a big deal for Curaleaf
For most Canadian cannabis companies, U.S. cannabis legalization is really a non-issue right now. Sure, over the long term, this could be a catalyst for various Canadian producers. However, over the near- to medium-term, U.S. cannabis players will enjoy the benefit of growing market share in a rapidly growing market.
Companies like Curaleaf are well-positioned in this regard. In fact, Curaleaf is the largest U.S. cannabis player in the United States that has legalized the recreational and medicinal use. The company’s got a vertically integrated business model from coast to coast in the U.S. Additionally, Curaleaf’s margins and revenue growth are among the tops of any cannabis company in North America right now.
This setup is extremely bullish for long-term investors. I think size and scale matter right now. Additionally, Curaleaf’s early-mover advantage in the U.S. is likely underpriced by the market today.
It’s not a cheap stock by any stretch of the imagination. However, Curaleaf’s valuation is still relatively attractive when compared to most Canadian cannabis players. With this sort of backdrop in mind, I can’t see why investors are looking at any other option right now.
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Preparing to become a global leader
The U.S. market is certainly the key market most cannabis producers are after right now.
That said, while awaiting federal legalization, Curaleaf has been busy building its global brand. The company recently expanded into the European market via a US$286 million deal to acquire Emmac Life Sciences. This deal is massive, not only in size but also from the standpoint of geographic diversification. Curaleaf gains access to key global cannabis markets such as Germany, Spain, Italy, and others. With the potential for country-wide legalization taking hold in multiple countries, the U.S. isn’t the only ticket to growth out there. Curaleaf is looking to capitalize on all possible markets.
Indeed, Curaleaf’s business model and position in the global cannabis market are unmatched right now.
The company’s recent results point to outstanding performance in its core markets. And few companies have the upside via U.S. legalization Curaleaf has today.
All of these factors combined make for a compelling investment thesis in Curaleaf today. Those seeking some high-growth exposure ought to consider this company today.
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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 Chris MacDonald has no position in any of the stocks mentioned.