Curaleaf Holdings still has loads of upside, GMP Securities says

US cannabis company Curaleaf Holdings (Curaleaf Holdings Stock Quote, Chart CSE:CURA) is showing solid execution during its rapid build-out, says GMP Securities analyst Robert Fagan, who in a client update on Thursday reiterated his “Buy” rating and C$21.00 target.

Yesterday, vertically integrated multi-state cannabis operator Curaleaf released its fourth quarter and full year 2018 financials, which featured net revenues of $32 million, up 49 per cent over the previous quarter and slightly above Fagan’s estimate of $30 million. (All figures in US dollars unless noted otherwise.) Curaleaf reported an EBITDA loss of $3.4 million, which was in line with Fagan’s negative $3.3 million estimate but better than the Street consensus at negative $4.6 million.

Fagan points to a number of recent positives from CURA. First, the company announced it would extend its share lock-ups covering 81 per cent of total shares out by approximately six months to October 20, 2019. The analyst says that this postpones a potential large supply overhang for CURA’s shares, which should in turn produce a strong positive share price reaction.

Second, CURA has announced a partnership with CVS retail and pharmacy company to distribute ‘Curaleaf Hemp’ products through 800 CVS stores, starting this Friday. Fagan says the move “provides a clear validation of CURA’s CBD product strategy while also strongly endorsing the company’s execution abilities.”

Third, CURA management has said that it could close on the previously announced deal to acquire Alternative Therapies Group, which would essentially double its recreational sales exposure during the second half of 2019.

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Fourth, management guidance, which calls for $400 million in 2019 revenue, has so far excluded the recently announced acquisitions of Acres and Eureka, which means that there could be more upside to the guidance.

Fagan says, “With a robust growth outlook, national supply deal with CVS, and annualized sales at a run-rate of ~$140 million currently, CURA has solidified its position as a leader in the US cannabis industry in our view. Our target price is based on a 25x multiple (unchanged) on our 2020 EBITDA forecast.”

The analyst’s C$21.00 target represented a projected return of 130.8 per cent at the time of publication.