Analysts at Canaccord Genuity (TSX:CF, LSE:CF) are not yet updating their estimates for Curaleaf as the cannabis producer appeals the New Jersey Cannabis Regulatory Commission’s (CRC’s) vote against renewing its adult-use retail and cultivation licenses in the state as of April 21, 2023.
Curaleaf said in a statement on April 14 that it has fulfilled the requirements necessary for the renewal of its licenses, it has never received any violation notices from the CRC to allow it to remedy the concern, and it will work with the CRC to ensure the renewal of its licenses.
The analysts wrote, while details remain thin, that based on their discussions with the company the crux of the denial relates to the CRC’s view of procedural matters related to Curaleaf’s decision to close its Camden County facility relative to employee unionization considerations, which resulted in the termination of 40 to 50 employees.
Of the employees terminated, Curaleaf said about 90% have been relocated to other positions within the company in New Jersey, the analysts wrote in a note to clients.
“The company is in the process of appealing the CRC’s decision, which requires a response within 48 hours and plans to expedite the decision to the state’s appellate courts if needed,” they wrote.
“Although no guarantees can be made regarding a resolution, management noted that they intend to resolve this matter without disruption to its adult-use channels on April 21.”
The analysts pointed out that the denial relates only to adult-use retail and cultivation, and they estimate that more than 20% of Curaleaf’s sales in New Jersey are currently to medical patients in the state.
While they noted the headline news was negative, the analysts wrote that they will wait for further details from the appeals process over the next week before adjusting their forward-looking assumptions for Curaleaf in the state.
As such, the analysts reiterated their ‘Buy’ rating and price target of C$10.50 for the stock.
“However, for context, we note that New Jersey is currently run-rating at total retail revenues of more than US$850 million,” Canaccord’s analysts wrote.
“Assuming a 70%/30% retail/wholesale mix for the company (with 20% related to non-impacted medical sales), we estimate that CURA’s 30% branded adult-use market share would represent upwards of US$175 million in annualized revenues to the company on a forward basis.”
After falling to about C$3 per share last week on the news, Curaleaf’s Canadian-listed shares were trading up 1% at C$3.15 shortly in the early afternoon on Monday.
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