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Weed stocks are gaining traction as the industry’s outlook appears to be brighter than ever after the HHS sent a letter to the DEA recommending the rescheduling of marijuana to a Schedule 3 drug. As the largest multistate operator in the US, Curaleaf Holdings, Inc. (OTC: CURLF) may be poised to gain the most from this improved environment which makes its stock a prime candidate to soar over the coming months. That said, the HHS’ recommendation may be a sign that the SAFE Banking Act may pass the Senate vote expected to occur this fall. For these reasons, going long on CURLF stock may provide investors with substantial gains in the long term.
CURLF Stock News
Weed is once again in the spotlight thanks to the HHS’ recent efforts to reschedule the substance. The Biden Administration has been working with the HHS to re-evaluate marijuana’s legal standing. As is, the results of this re-evaluation could be a re-scheduling or de-scheduling which entails total legality. Having said that according to a letter obtained by Bloomberg, the HHS’s findings led to advising the DEA to reschedule Marijuana from a Schedule 1 to a Schedule 3 substance. This outcome may at first seem far-fetched given the FDA’s renowned antagonism regarding drugs, however, the HHS’ recommendation is more in line with the law than most realize.
Currently, weed is a Schedule 1 substance which means that it is considered to have a high likelihood of abuse and no medical application. This classification does not reflect reality since marijuana has a lot of medical applications from treating chronic pain to Parkinson’s. It also has a low abuse rate since only 9% of cannabis users suffer from marijuana addiction.
If the DEA follows the HHS’ recommendation and re-schedule marijuana, this move will likely create regulatory and political ripples. From a regulatory standpoint, federal institutions will be able to conduct medical research using marijuana which could lead to new treatments. Furthermore, if marijuana is rescheduled into a Schedule 3 drug, the U.S. code IRC 280E will no longer apply to marijuana businesses. IRC 280E basically dictates that any company that trades or does any business with substances in Schedule 1 or 2 is not eligible for tax deductions. This means that if marijuana is rescheduled to schedule III as per the letter obtained by Bloomberg, multistate operators will no longer be subjected to extremely high taxation on a regular basis due to access to tax deductions.
From a political standpoint, this move is likely to increase the public’s awareness of the SAFE Banking Act which positively affects marijuana businesses. This will put pressure on politicians, especially since most of their constituency favors weed legalization and elections are right around the corner. As is, 68% of Republican voters and 80% of Democratic voters are pro-cannabis legalization, and overall, 88% of US adults are in favor of legalization. This means that US politicians, regardless of Party affiliation, will likely feel pressured to vote in favor of the Act which is expected to be this fall.
If this bill passes, marijuana businesses will have access to the financial system, meaning that they will be able to store their money in banks and take out loans instead of relying on cash. In light of this, CURLF stock could be considered a noteworthy long-term investment since it is currently operating in 20 states making it the largest US cannabis producer and distributor.
CURLF Stock Financials
According to the company’s Q2 2023 report, its assets slightly decreased from $3.4 billion at the beginning of the year to $3.3 billion as a result of the company’s cash balance decreasing from $163.1 million to $85 million due to the cash used in financing activities from continuing operations. On the other hand, liabilities remained relatively unchanged only decreasing from $2 billion to $1.9 billion.
When it comes to revenue the company experienced a YoY increase from $326.9 million to $338.5 million. This occurred thanks to retail and wholesale revenue increasing from $325.7 million to $337 million. Meanwhile, total operating expenses increased from $143.9 million to $153.6 million.
That said, the company recorded a significant income tax expense that amounted to $41.3 million and increased its cost of revenue from $147.9 million to $192 million. However, this increase in cost of revenue is normal given the company’s extensive endeavors while its taxes may decrease significantly if marijuana is re-scheduled to a Schedule 3 substance. Given these factors, the company’s net loss increased from $21.7 million to $74.4 million.
@pennycheck believes that CURLF stock is the most promising multistate operator.
@JosephLusardi is bullish on CURLF stock.
CURLF Stock recently exited a bearish trend as it was trading in a downward channel. Looking at the indicators, the stock is trading above the 200, 50, and 21 MAs which is a bullish sign. Meanwhile, the RSI is overbought at 70 and the MACD is bullish to the upside.
As for the fundamentals, CURLF has the largest footprint out of all multistate operators with operations in 20 states. For this reason, the company may benefit the most from the growing momentum toward marijuana re-scheduling and the potential passage of the SAFE Banking Act. With the stock yet to confirm breaking its downward channel, investors could wait for the stock to retest the upper trend line and go long ahead of the SAFE Banking Act vote that is expected to occur this fall.
CURLF Stock Forecast
Given the HHS’ recent re-scheduling recommendation regarding cannabis, the marijuana industry may be poised to experience significant benefits. If cannabis is rescheduled into a Schedule 3 substance by the DEA, multi-state operators will be taxed at much better terms as they would be eligible for tax deductions. Meanwhile, the HHS’ recommendation likely means that the SAFE Banking Act may very likely pass the Senate vote expected to take place this fall. Given the potential of this news on the marijuana industry, going long on CURLF stock may prove to be a profitable long-term investment given its status as the largest multistate operator in the US.
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