Curaleaf stock is a Buy, says Beacon

Look for revenue and earnings to come in a little under the consensus for Curaleaf Holdings (Curaleaf Holdings Stock Quote, Charts, News, Analysts, Financials CSE:CURA) when the company finally reports its fourth quarter 2022 results next Monday. That’s the call from Beacon Securities analyst Russell Stanley, who provided an update to clients on Thursday where he reiterated a “Buy” rating on the cannabis stock.

Headquartered in Wakefield, Mass., Curaleaf is one of the largest multi-state operators in the US, with brands including Curaleaf, Select and Grassroots and operations in 19 states including 152 dispensaries and almost 5,500 employees. Curaleaf is also currently the largest vertically-integrated cannabis company in Europe.

The company was originally scheduled to deliver its Q4 2022 on March 28 but had the release postponed, citing a need for more time to convert its books from IFRS to US GAAP-based reporting. After Monday’s release, CURA plans on reporting its Q1 2023 on or about May 17.

For the Q4, Stanley is forecasting $352 million in revenue and $79 million in adjusted EBITDA, which would be in-line with management’s preliminary numbers, delivered last week. The consensus call is for revenue of $353 million and EBITDA at $84 million. (All figures in US dollars except where noted otherwise.)

Stanley noted CURA’s announcement in late January involving a series of cost-cutting and rationalization measures across several states as well as a 2023 free cash flow guidance of over $125 million.

“We will be looking for an update on that guidance, as well as any colour management provides on the revenue/EBITDA expectations underlying that guidance,” Stanley wrote.

Stanley is forecasting full 2022 revenue of $1.343 billion and 2023 revenue of $1.671 billion, with adjusted EBITDA expected to move from $322 million in 2022 to $471 million in 2023.

With his “Buy” rating, Stanley maintained a 12-month target on CURA of C$12.00, which at press time represented a projected return of 269 per cent.

Stanley said Curaleaf is currently trading at a discount to its peer group.

 “CURA trades at 5.6x our F2023 adjusted EBITDA forecast. This represents a 15 per cent discount to the 6.6x average amongst CSE-listed US operators. Potential company-specific catalysts include the Q4 results/comments Monday night, additional build-out updates, and the Q1 results ~May 17th,” he said.

Curaleaf shares have been sliding over the past two years, along with the rest of the cannabis sector, going from a high of about C$20 in early 2021 to now in the C$3-C$4 range.