Curaleaf Aims To Be First In Cannabis Sector To Top US$1B Revenue In 2020
Investing.com | Sep 04, 2019 12:38AM ET
Shares of Curaleaf Holdings Inc (OTC:CURLF), (CSE:CURA), ended last week up 12.5% after the Massachusetts-based cannabis company released its second quarter report last Tuesday. Although earnings did not meet analysts’ expectations, the company provided ambitious guidance for the 2020 fiscal year, setting the stage for it to become the first marijuana grower to post revenue figures that could top the US$1-billion (C$1.3 billion) mark.
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The projection puts the marijuana grower on a sharp upward trajectory that will firmly establish it among the largest tier-one cannabis companies in North America, especially now that Canopy Growth (NYSE:CGC), (TSX:WEED)—which had previously projected revenues to hit the $1-billion plateau—is scaling back its outlook to a more modest level.
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Curaleaf, which operates in 12 states, provided guidance that it expects to generate between US$1 billion and US$1.2 billion in revenue in the next fiscal year. The company did add, however, that these targets are based on finalizing two major acquisitions—the purchase of Select and Grassroots.
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Major Acquisitions
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In May, Curaleaf announced the takeover of the Select brand from Cura Partners Inc. in an all-stock transaction valued at US$ 948.8 million (C$1.27 billon). Select is regarded as the best known wholesale cannabis brand in the U.S. The deal includes Select’s manufacturing, processing, distribution, marketing and retail operations that contains a network of 900 retail outlets in California, Arizona, Oregon and Nevada.
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Then, later in July, Curaleaf announced the US$875 million (C$1.68 billion) takeover of GR Companies Inc., commonly referred to as Grassroots, the largest private multi-state cannabis company in the United States. When completed, the cash and stock deal would make Curaleaf the largest marijuana company in the U.S. and the largest in the world by revenue. The deal would also expand Curaleaf’s base of operations to 19 states.
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But both these deals are currently being reviewed by the U.S. Department of Justice’s anti-trust regulators.
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Impressive Revenue Growth
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Despite the big headline, Curaleaf’s should not be overlooked. It reported an impressive 231% year-over-year growth in actual revenue, hitting just shy of US$48.5 million (C$64.7 million) for the three-month period ending June 30, 2019. In the same quarter in 2018, revenues were $14.6 million (C$19.5 million). Total revenues for Q2 2019 increased 38% compared to the previous quarter.
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Net losses also increased, coming in at US$24.5 million (C$32.7 million), compared to US$4.93 million (C$6.6 million) in the corresponding quarter in 2018, and US$10.2 million (C$13.6 million) the previous quarter.
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But when you stack it all up against the other big players in the sector—especially the biggest cannabis company in Canada and the largest by market cap in the world, Canopy Growth— Curaleaf begins to take on more street cred.
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If its latest deals can get past the hurdles of the U.S. Justice Department review, it will be a company to watch as we head into the second half of fiscal 2019.
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Canadian Weed Output Doubles Since Legalization
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Since cannabis was legalized in Canada last October, the amount of licensed weed produced has doubled. That was among one of the findings in Statistics Canada's latest monthly GDP updates released last Friday.
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In June, the cannabis sector produced C$7.78 billion (US$5.83 billion). The country’s black market cannabis market shrank by about 21% since legalization, StatsCan estimates.
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Growing Licenses Issued In Israel
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The Israeli Ministry of Health has issued seven new medical cannabis growing licenses under the country’s new reform of the industry. The permits are expected to triple the supply of medical cannabis available, with product supplying pharmacies by the end of the year, according to a report by Calcalist.
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In order to help regulate the industry, the Israeli reforms will prohibit the sale of cannabis directly to individuals. All medical cannabis products must be sold at pharmacies.
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