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Why Curaleaf Stock Got Crushed by the Market Today

What happened
Few investors were fired up about cannabis multi-state operator (MSO) Curaleaf Holdings (OTC: CURLF) on Wednesday. On the back of a dispiriting report from a prominent marijuana news site, the company’s shares dived by nearly 6%, a far steeper fall than the 1% drop of the S&P 500 index.
So what
To be clear, the article published that day in MJBizDaily.com was not specifically about Curaleaf. Rather, it addressed cannabis industry pricing across the broader North American market, and its conclusion is sobering — both U.S. retailers like Curaleaf and their Canadian counterparts have been increasingly and aggressively discounting their products.
Surveying the price developments of marijuana flower in states where recreational pot has been legal for some time, the report indicated that on average, discounts in certain U.S. states can approach nearly 25%. Both Washington and California have rates between that rate and 25%, while highly weed-friendly Oregon, Colorado, and Nevada dispensaries are discounting at rates slightly above and below the 15% mark.
Canadian discounts were much narrower, but they have been growing over time, according to MJBizDaily.com’s findings. These range from over 4% in the most populous province of Ontario, to the low-mid 2% range of British Columbia and Saskatchewan.
Now what
Much of this has to do with heavy competition; even in states that limit recreational licensing, there are typically several retailers vying for the consumer dollar. Compounding that, there is a dizzying variety of brands and strains available on the market, and discounts are a time-tested way to draw attention to particular products and make them more attractive.
Of course, deeper discounting means less revenue for marijuana retailers like Curaleaf — adding another headache in an industry already beset with challenges (high taxation rates, black market competition, patchwork legalization, etc.)
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. –

What happened

Few investors were fired up about cannabis multi-state operator (MSO) Curaleaf Holdings (OTC: CURLF) on Wednesday. On the back of a dispiriting report from a prominent marijuana news site, the company’s shares dived by nearly 6%, a far steeper fall than the 1% drop of the S&P 500 index.

So what

To be clear, the article published that day in MJBizDaily.com was not specifically about Curaleaf. Rather, it addressed cannabis industry pricing across the broader North American market, and its conclusion is sobering — both U.S. retailers like Curaleaf and their Canadian counterparts have been increasingly and aggressively discounting their products.

Surveying the price developments of marijuana flower in states where recreational pot has been legal for some time, the report indicated that on average, discounts in certain U.S. states can approach nearly 25%. Both Washington and California have rates between that rate and 25%, while highly weed-friendly Oregon, Colorado, and Nevada dispensaries are discounting at rates slightly above and below the 15% mark.

Canadian discounts were much narrower, but they have been growing over time, according to MJBizDaily.com’s findings. These range from over 4% in the most populous province of Ontario, to the low-mid 2% range of British Columbia and Saskatchewan.

Now what

Much of this has to do with heavy competition; even in states that limit recreational licensing, there are typically several retailers vying for the consumer dollar. Compounding that, there is a dizzying variety of brands and strains available on the market, and discounts are a time-tested way to draw attention to particular products and make them more attractive.

Of course, deeper discounting means less revenue for marijuana retailers like Curaleaf — adding another headache in an industry already beset with challenges (high taxation rates, black market competition, patchwork legalization, etc.)

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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