Curaleaf stock price analysis: sell in May and go away

By:
on May 12, 2023
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  • Curaleaf share price has been in a steep sell-off in the past few months.
  • This decline is in line with the Global X Cannabis ETF (POTX).
  • I recommend against catching this falling knife as its growth slows.

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Curaleaf (CURA) stock price has been in a strong bearish trend in the past few months as the cannabis sector’s hype evaporates. The shares plunged to a low of $3.30 on Thursday, meaning that they have fallen by over 85% from the all-time high in 2020. In the same period, the Global X Cannabis ETF (POTX) stock has crashed by over 90%.

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Perils of investing in hype

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In March, I wrote an article where I warned against the risks of investing in trending areas. At the time, I warned that most hyped artificial intelligence stocks like C3.ai and Guardforce AI would crash. I also cited the hot AI cryptocurrencies like SingularityNET (AGIX) and Fetch.ai.

The same tragedy has happened in the cannabis industry. A few years ago, cannabis stocks like Tilray Brands and Aurora Cannabis were the hottest in the financial market. Today, most of them have seen their shares plunge by over 80%.

Curaleaf stock price has plunged hard in the past few months as the industry has lost hype. Earlier this month, the company said that its revenue jumped by 14% to $352 million in the last quarter. Its gross and EBITDA margins jumped to 47% and 21%, respectively. Further, its operating cash flow came in at $46 million even as the company spent $18 million in its international business.

Curaleaf has also made several strategic initiatives to improve profitability. For example, it has exited some of its key loss-making markets and is now focusing on Florida, Germany, and the UK. In a statement, Boris Jordan, the chairman said:

“Curaleaf will be on offense while others play defense. Make no mistake, we enter 2023 with a cleaner inventory position, ample cash on hand, and we will be investing in our business.” 

Despite these initiatives, the company expects to have low to mid-single-digit growth this year. This is a relatively slow growth for a company in a high-growth industry.

Curaleaf stock price forecast

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CURA chart by TradingView

Turning to the weekly chart, we see that the CURA share price has been in a strong bearish trend in the past few months. The shares have moved below the important support level at $3.70, the lowest level on March 2020. It has also retested that support point, which is a sign of a bearish continuation.

Therefore, Curaleaf share price will likely continue falling as sellers target the next key support point at $2.50. At this stage, I don’t support catching this falling knife.

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