Curaleaf is a Buy in cannabis stocks, says Beacon

First quarter earnings turned out alright for Curaleaf Holdings (Curaleaf Holdings Stock Quote, Charts, News, Analysts, Financials CSE:CURA), according to Beacon Securities analyst Russell Stanley, who looked over the results in a Thursday report. Stanley reiterated a “Buy” rating on the stock and C$8.50 per share target price, saying a move up to the Toronto Stock Exchange is in the works.

New York-based Curaleaf released its Q1 2023 financials on Wednesday, with revenue coming in up 14 per cent year-over-year to $336.5 million and adjusted EBITDA of $73.2 million compared to $76.1 million a year earlier. (All figures in US dollars except where noted otherwise.)

“We continue to optimize our U.S. assets for responsible growth and are very excited about the investments we are making internationally, setting the stage for robust growth in ’24, ’25, and ’26 as cannabis adoption accelerates across Europe. We’ve entered 2023 from a position of strength with ample cash on hand, and will be investing in our business, setting us up for years of market share expansion,” said Executive Chairman Boris Jordan in a press release.

Stanley said the Q1 results beat analysts’ expectations on top and bottom. The $336 million topline was better than Stanley’s call at $325 million and the consensus at $333 million, while the $73 million EBITDA was also above Stanley’s estimate at $67 million and the Street at $71 million.

He noted that management reiterated its guidance for low to mid-single digit growth in 2023, implying sales of $1.34-$1.38 billion, with EBITDA margins expected in the mid-20 per cent range and therefore implying $321-$358 million in EBITDA.

Stanley said Curaleaf’s European operations continue to see strong growth, with its international division generating 130 per cent year-over-year revenue growth and a continued bolstering of its product supply in advance of expected demand growth in Germany. 

On comps, Stanley said CURA is trading at 5.9x his 2024 EV/adjusted EBITDA forecast, which stands as a 32 per cent premium to the 4.5x average among CSE-listed US cannabis operators.

“We continue to believe CURA deserves a premium multiple given its size/scale/liquidity. Potential company-specific catalysts include further buildout updates, potential M&A activity, progress towards a TSX listing, and the Q2 results (August). The technical picture has improved, with the stock having broken its accelerated downtrend,” Stanley wrote.

At press time, Stanley’s C$8.50 target represented a projected one-year return of 130 per cent.