With acquisitions in the pipeline he says are very likely to close despite the US department of Justice taking a closer-than-expected look at cannabis M&A transactions, Beacon Securities analyst Russell Stanley says Curaleaf (Curaleaf News, Stock Quote, Chart CSE:CURA) is cheap compared to its peers.
In a research update to clients today, the analyst maintained his “Buy” rating and one-year price target of $23.00 on Curaleaf, implying a return of 157 per cent at the time of publication.
“We continue to view CURA as one of the premier multi-state operators,” Stanley says. We believe it still has the largest retail footprint of any publicly traded MSO, with 47 dispensaries positioning CURA well to stay very close to the consumer. It has developed strong market positions in both Florida (the 3rd largest state in the US, where the patient count has more than doubled over the last year), and New Jersey (which just passed legislation that should support material medical market growth). In March, the company announced entering agreements that extend the lock-ups on 371M shares through October 29th. During its earnings call in late May, management predicted that it would be able to issue guidance (reflecting acquisitions) along with its Q2/19 results, which we expect to be released later in August.”
Stanley thinks LEAF will post Attrib. EBITDA of $310-million on Managed Revenue of $903-million in in fiscal 2020. He expects those numbers will improve to EBITDA of $685-million on Managed Revenue of $1.64-billion the following year.
At current levels, CURA trades at approximately 6x our 2021E EBITDA forecast,” the analyst adds. “This represents a 48% discount to the 11x average for the broad peer group, and a 57% discount to the 14x average amongst companies with a C$1B+ market capitalization. Potential catalysts include the Q2/19 results to be released in August (which should include revenue/EBITDA guidance), progress on the acquisition of Select, closing of the Nevada (Acres) and ATG (Massachusetts) transactions, as well as additional buildout and M&A news.”
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