Cannabis stocks have begun 2020 on the low, and the Horizons Marijuana Life Sciences ETF is only up 2% since the beginning of the year. Most of the cannabis operators are low on cash and are still chasing elusive profits, but one cannabis company has been bucking the trend.
In the past few months, Curaleaf Holdings (CSE:CURA) (OTCQX:CURLF) has been generating some returns, and the stock has gained over 25% in the last three months.
Impressive Q3 earnings boosted the stock
In November, the company reported its Q3 earnings in which the company reported record revenue of around $61.8 million. Since then, the company’s stock has experienced a strong rally. More interesting is that the company reported positive adjusted EBITDA of $9 million. Despite reporting a net loss of $7.4 million that was still a mild loss and the positive EBITDA was a better indicator of Curaleaf’s performance, considering it does not include non-cash items such as amortization and depreciation.
The positive figures the company reported were encouraging, considering most marijuana stocks have been struggling. Cannabis companies have been reporting losses and job cuts, and therefore Curaleaf’s positive numbers make it an attractive investment. The company has not announced any drastic measures, so it does not seem if it is running low on cash.
Curaleaf stock valued expensively
Currently, Curaleaf trades at $6.25 per share, which is far from its 2019 high of $12. It is unlikely to get to the highs unless it also reports a strong Q4. Currently, Curaleaf stock trades at 17x its sales, which is relatively expensive compared to peers such as Acreage Holding Inc. (OTCMKTS: ACRGF), which trades at 8x its sales.
There is an opportunity for Curaleaf to continue growing, but from now, the stock is expensively priced. However, although the company’s valuation is higher than that of its peers, this valuation may not last if the company underperforms during its Q4 earnings release.
Until the company curbs its cash burn and demonstrates that it can generate profits consistently, it can be a risky buy today. Sign up below to stay up to speed on any major developments with Curaleaf and other fast-moving stocks.