Curaleaf stock is looking attractive, says Beacon

US cannabis name Curaleaf (Curaleaf Stock Quote, Charts, News, Analysts, Financials CSE:CURA) delivered a surprise to the upside in its recent earnings report, according to Beacon Securities analyst Russell Stanley, who reviewed the numbers in a client update on Tuesday.

One of the heavyweights of the US cannabis scene, Massachusetts-headquartered Curaleaf said its third quarter 2022 generated $340 million in revenue compared to $317 million a year earlier and $84 million in adjusted EBITDA compared to $71 million a year ago. (All figures in US dollars except where noted otherwise.)

The company said while it had unexpected revenue hits in Florida from Hurricane Ian and in New Jersey from regulatory delays on store openings (leading to sequential revenue growth of just one per cent), business’ fundamentals remain strong.

“Our record third quarter was punctuated by the close of our landmark acquisition of a majority stake in Four20 Pharma. Since quarter end, we also closed on the Tryke  acquisition one I expect will further strengthen our position in Arizona, Nevada, and Utah,” said Boris Jordan, founder and Executive Chairman, in a Monday press release.

Looking at the Q3, Stanley said the top and bottom lines of $340 million and $84 million were beats of his forecast at $331 million and $71 million, respectively, while coming more in-line with the consensus at $336 million and $84 million, respectively.

But Stanley noted management’s softer guidance calling for Q4 revenue of between $353 and $355 million, which the analyst called that conservative, even as he noted management’s claims of ongoing headwinds in Pennsylvania, Colorado and California.

Stanley said the technical picture is improving for CURA.

“CURA trades at 10.3x our new F2023 adjusted EBITDA forecast. This represents a 55 per cent premium to the 6.7x average amongst CSE-listed US operators,” Stanley wrote. “CURA’s size and relative liquidity will likely make it a go-to stock for investors as sentiment improves, and we therefore believe a premium valuation multiple is justified.”

“Potential company specific catalysts include further buildout updates, the Q4 results in early 2023 and potential M&A activity. The stock is now testing the long-term uptrend on its weekly chart, making this an attractive (re)entry point for investors,” he said.

With the update, Stanley reiterated a “Buy” rating on Curaleaf while lowering his target price from C$14.00 to C$12.00 per share, which at press time represented a projected one-year return of 66 per cent. Year-to-date, CURA is currently down about 33 per cent, while over the past six months the stock is about even.