Curaleaf is still a buy, Beacon Securities says

Beacon Securities analyst Russell Stanley is still looking positively upon Curaleaf Holdings Inc. (Curaleaf Stock Quote, Chart, News, Analysts, Financials CSE:CURA), reiterating his Buy rating on the stock in a report issued Friday while maintaining his target price of $25.00/share for the company, with a potential return of 52 per cent.

Stanley’s latest analysis of Curaleaf, a vertically integrated cannabis operator in the United States which operates 108 dispensaries, 23 cultivation sites and 30 processing facilities in 23 states, comes after the Wakefield, Mass.-headquartered operation announced the opening of a new dispensary in Wells, Me., the company’s fifth location in the state, with an additional 43,000-square foot cultivation and manufacturing facility also located in the state.

“While ME is not a large state, CURA is very well established here, having operated in Maine since 2014,” Stanley said. “While we are leaving our estimates/valuation unchanged, we view the continued expansion of CURA’s retail footprint positively.”

The opening time is also optimal, as reciprocity regulations in Maine allow the Wells location to serve tourists if they have valid medical certification from their home state.

“It’s important for medical patients to have access to the medication they need while travelling, and Curaleaf Wells is happy to provide continued access to quality products and expertise our patients know and trust,” said Scott Reed, General Manager at Curaleaf Maine in the company’s July 23 press release. “We are excited to be in Wells and serve our expanded patient community.”

Curaleaf has had healthy financial reports and projections for some time, and Stanley doesn’t see that changing any time soon. Revenues appear to be on a steep upward trajectory, as Stanley has a forecast of $1.282 billion in revenues for 2021, a steep jump from the reported $627 million in 2020, with a further jump to $2.025 billion projected for 2022.

Stanley also has the company’s EBITDA jumping significantly in that timeframe, moving from the reported $144 million in 2020 to a projected $369 million in 2021, with a further forecast of $858 million in place for 2022.

Consequently, Curaleaf valuation ratios are forecast to drop in that period, with Stanley forecasting the EV/Revenue multiple to drop from the reported 15.7x in 2020 to a forecasted 7.7x in 2021, then falling again to 4.9x for 2022.

The EV/EBITDA multiple is also projected to drop considerably, with Stanley projecting it to fall from the reported 68.6x value in 2020 to an estimated 26.7x in 2021, then again to a projected 11.5x in 2022.

Along with the company’s Maine expansion, Curaleaf has also recently expanded its presence in New Jersey, having opened its second dispensary in the state in Edgewater Park, located about 40 minutes northeast of Philadelphia along the New Jersey-Pennsylvania border, as well as having another fully operational cultivation facility in Winslow, which recently completed its first harvest.

In addition to the expansions, Curaleaf has also established a unique branding partnership to promote social equity with hip-hop pioneer Fab 5 Freddy and Bernard Noble, who was imprisoned for marijuana possession but released early, on a new B Noble brand of high-quality one-gram pre-rolls in packs of two, symbolizing the two grams of cannabis for which Bernard was arrested.

Curaleaf is also collaborating with Rolling Stone magazine on a special line of its Select-branded products, which will feature three strains and flavor profiles hand-selected by Rolling Stone to celebrate some of the most well-known and genre-defining artists and sounds in music history.

“Music and Cannabis go hand in hand,” said Rolling Stone President and Chief Operating Officer Gus Wenner in Curaleaf’s June 8 press release. “Rolling Stone has a legacy of celebrating this connection and a long history of reporting on the fight to legalize cannabis. “We are thrilled to have found a perfect partner in Curaleaf who gives us the opportunity to design a product that elevates the music listening experience and celebrates the deep connection between the two.”

With second-quarter results expected in a conference call after the market closes on August 9, Stanley remains bullish on Curaleaf, particularly in relation to its market contemporaries.

“As the largest US cannabis company by market capitalization and footprint, and one of the most liquid based on the average daily value traded over the last 30 days, we continue to expect CURA to be a core position for many cannabis investors,” he said.

At the time of publication, Curaleaf Holdings Inc. was trading at $16.15/share on the Canadian Securities Exchange, down 36 cents from its Friday opening figure of $16.51/share.