Marijuana has come a long way from the hackneyed comedy sketches of Cheech & Chong.

The escalating legalization of marijuana has given rise to cannabis dispensaries, where marijuana products are sold over the counter just like the products you can buy at your friendly neighborhood CVS.

Cannabis dispensaries are local government regulated physical locations, typically inside a retail storefront, in which a person can legally buy marijuana and marijuana-related related products for medical or recreational use.

The predecessors to these dispensaries are the marijuana-dispensing “coffee shops” of permissive Amsterdam that first arose in the 1970s. The fast spread of retail cannabis storefronts in the U.S. represents nothing less than a cultural revolution.

The leader in the booming cannabis dispensary space is Curaleaf Holdings (CSE: CURA, OTC: CURLF).

Curaleaf is testimony to pot’s integration into mainstream consumer society. Is Curaleaf stock a smart buy in 2019, or a warning sign that the marijuana industry is in a bubble? Let’s find out.

What Is Curaleaf?

Curaleaf Holdings, based in Wakefield, Mass., operates an integrated network of medical and wellness cannabis facilities throughout the United States.

Curaleaf cultivates, processes, markets, and dispenses marijuana products in a range of forms, including flower, pre-rolls and flower pods, dry-herb vaporizer cartridges, concentrates for vaporizing, concentrates for dabbing, tinctures, lozenges, capsules, and edibles.

Multiple product formats provide an array of administration options, including inhalation, ingestion, sublingual, and topical.

With a market cap of $3.5 billion, Curaleaf also provides non-cannabis management and consultative services to licensed cannabis operators, to assist with cultivation, extraction, production, and retailing.

Founded in 2010, Curaleaf currently operates a network of 34 dispensaries, 12 cultivation sites, and 10 processing sites in 12 states.

How Has Curaleaf Stock Performed?

Since going public on October 29, 2018, CURA has lost 30%, compared to a loss of 7% for the S&P 500.

Over the past month, CURA has gained 15.9% compared to a decline of 2.3% for the S&P 500.

Who Are Curaleaf Rivals?

MedMen Enterprises (OTC: MMNFF)

Based in Culver City, California, MedMen cultivates, produces, distributes, and retails recreational and medicinal cannabis. Founded in 2010, the company recently has expanded beyond its initial markets of California, Nevada, and New York.

With a market cap of $1.5 billion, MedMen currently operates 69 dispensaries and 17 cultivation and production facilities, all licensed, across 12 states.

Trulieve Cannabis (OTC: TCNNF)

Based in Quincy, Florida, Trulieve cultivates, distributes, and retails medical cannabis in the U.S.

With a market cap of $959.1 million, the firm offers a suite of Trulieve branded products, including nasal sprays, capsules, concentrates, syringes, and cannabis flower in containers for vaporizers, topical creams, tinctures, and vape cartridges. The company distributes its products to 21 Trulieve branded dispensaries in Florida.

Medical Marijuana (OTC: MJNA)

Medical Marijuana produces and markets patented medical marijuana and industrial hemp products for the pharmaceutical, nutritional, and cosmetics industries.

With a market cap of $315.7 million, the company provides management support and consulting services to dispensaries, cooperatives, collectives, wellness facilities, and medical clinics in the legal cannabis industry.

Will Curaleaf Go Up In 2019 (Should You Buy)?

According to the latest statistics from Arcview Market Research and its research partner BDS Analytics, spending on legal cannabis worldwide is expected to hit $22.8 billion by 2020. The adult-use (recreational) market will account for 67% of spending; medical marijuana will take up the remaining 33% (see chart).

Source: Arcview Market Research and BDS Analytics.

Curaleaf Holdings was the largest marijuana initial public offering (IPO) ever, with the company temporarily boasting a lofty valuation of more than $4 billion, after its debut in late October.

Curaleaf enjoys another distinction: it’s the largest publicly traded retail chain of marijuana products in the U.S.

Curaleaf’s revenue growth is on fire as the company expands. The company’s total sales reached $45.1 million through the first nine months of fiscal 2018, compared to $13 million through the first nine months of 2017. Gross profit in the first nine months of 2018 came in at $27.7 million. Curaleaf’s current production capacity is about 63,000 pounds of dry marijuana flower.

Curaleaf announced in November that it posted a 289% year-over-year increase in total revenue in the third quarter of 2018, for a 46% increase in comparison to the previous quarter’s results. Total third quarter revenue increased to $21.4 million compared to $5.5 million last year.

Management gave guidance for 2019 that sees revenues as high as $400 million, along with free cash flow of $100 million.

In April 2018, the company acquired Swell Farmacy, a vertically integrated Arizona operator with four dispensaries. In October 2018, the firm acquired Midtown Roots, a dispensary in Phoenix, Arizona. In January 2019, Curaleaf opened a new dispensary in Florida, a state where dispensary demand is particularly strong.

All of these factors bode well for Curaleaf stock this year and beyond.

Will Curaleaf Go Down In 2019 (Should You Sell)?

There’s a bear case, and it’s persuasive. Marijuana is a growth industry, but dispensaries are a particularly risky aspect. They entail bricks-and-mortar expenses and are subject to the vagaries of foot traffic. As investors and entrepreneurs jump onto the marijuana bandwagon, an industry-wide consolidation is looming.

This video explains how pot stocks have been on a roller coaster:

Curaleaf struggles on the bottom line and net income is on a downward slope. In the third quarter of 2018, despite growing revenue, the company reported a net loss of $33.7 million, compared to net income of $500,000 in the same quarter a year ago.

The company’s adjusted earnings before interest, tax, depreciation and amortization (EBITDA) loss totaled $12.9 million for the nine months ended September 30, 2018, compared to an EBITDA loss of $3.5 million for the same period in 2017. Operating expenses remain high.

Overall Curaleaf Forecast And Prediction For 2019

I believe that the bull case prevails for Curaleaf, but with caveats.

Curaleaf has carved out a trusted, brand name presence in high-growth geographic regions, especially in the promising market of Florida. The company has a solid record of sales growth, which should continue as consumers flock to dispensaries. According to Arcview Market Research/BDS Analytics, cannabis is the fastest growing consumer segment in the U.S.

In 2019, Curaleaf management intends to expand the company’s retail footprint through strategic acquisitions, with the goal of vertically integrating assets under its consumer brand.

The firm has committed $83.5 million to fund dispensary acquisitions in Maryland, Massachusetts, Nevada, and Arizona, with an additional $83 million for minority buy-outs in Massachusetts, Florida, and Connecticut.

Curaleaf should start to see an improved bottom line, as it generates synergies throughout the marijuana supply chain. The company currently covers 70% of the U.S. cannabis market, reaching 134 million of the addressable population.

Curaleaf is a well-positioned play on the cannabis dispensary market, but buyer beware. The stock isn’t suitable for risk-averse investors. Long-term patience probably will be rewarded, but shareholders should brace themselves for wild rides along the way.

John Persinos is the managing editor of Investing Daily.