Last week, U.S. President Donald Trump signed an executive order directing federal agencies to reclassify marijuana from Schedule I to Schedule III under the Controlled Substances Act.
This rescheduling was the most significant shift in U.S. cannabis policy in over five decades. The move allows medical cannabis companies to deduct standard business expenses under IRS rules for the first time and improves access to banking and institutional capital.
The Centers for Medicare and Medicaid Services will launch an April pilot program that enables certain Medicare seniors to receive free, doctor-recommended CBD (cannabidiol) products that meet local safety standards. However, Trump emphasized the order does not legalize recreational marijuana use.
The potential access to traditional capital and several other markets makes cannabis stocks a top investment option right now. Investing in quality cannabis stocks offers TFSA (Tax-Free Savings Account) investors an opportunity to generate outsized gains over the next few years.
One such top cannabis stock is Curaleaf (TSX:CURA), which is valued at a market cap of $3.2 billion. Curaleaf stock has risen more than 80% in 2025. Despite the recent uptick, it trades 82% below all-time highs.
The bull case of investing in this TSX cannabis stock
In Q3 2024, Curaleaf reported revenue of US$320 million, a 3% year-over-year decline. The cannabis producer attributed the fall in sales to double-digit price compression across all markets, which offset volume gains.
Curaleaf announced a restructuring initiative 12 months ago to focus on genetics improvement, supply chain optimization, and retail realignment.
Curaleaf reported gross margins of 50%, expanding 115 basis points year over year despite pricing headwinds. The margin improvement was tied to cultivation efficiency gains that increased average flower potency above 30% for the first time in company history.
Management also credited the Dark Heart genetics program and disciplined growing techniques to yield improvements across the cultivation network.
The marijuana giant reported US$53 million in operating cash and US$37 million in free cash flow in Q3, which meant it allocated US$16 million towards capital expenditures. It reduced balance sheet debt by US$28 million and ended Q3 with US$107 million in cash.
International revenue rose 56% year over year, driven by Curaleaf’s gains in the U.K. and Germany. This segment will be a key driver of future growth even as it reduced EBITDA (earnings before interest, tax, depreciation, and amortization) by 120 basis points.
Management resolved near-term German supply constraints by having regulators lift import permit caps, providing adequate headroom for the next several quarters.
Curaleaf retired US$30 million of acquisition debt after quarter-end, completing its Tryke obligation and leaving approximately US$70 million payable over two years. It secured a US$100 million revolving credit facility with Needham Bank at 8% interest, which provides it with the flexibility to refinance higher-cost debt.
Is the TSX stock undervalued right now?
Analysts tracking Curaleaf stock forecast revenue to increase from US$1.3 billion in 2025 to US$1.7 billion in 2029. In this period, free cash flow is projected to improve from US$82.4 million to US$540 million.
If the TSX cannabis stock is priced at 10 times forward FCF, which is relatively cheap, it could return over 120% within the next three years.
