Analysts at Stifel noted that Curaleaf Holdings Inc reported first-quarter financial results that slightly exceeded the company’s own guidance, and came in slightly above consensus estimates.
“In addition, management issued 2Q/23 revenue guidance in-line with consensus, setting the company up to meet its previous 2023 sales guidance under the current run-rate scenario, which we view positively,” Stifel analysts said in a note to clients.
“However, we believe investor focus remains at the profitability level with a considerable gap remaining between CURA's current profile and its reiterated 2023 guidance of EBITDA (mid 20's margin) and OCF cash generation guidance (over $100 million with $40 million from inventory reduction).”
Stifel maintained its C$6.50 target on Curaleaf’s stock while incorporating the company’s 1Q results and near-term guidance into its forecasts.
Curaleaf shares were up 3.5% at C$3.83 in Thursday morning trade on the Canadian Securities Exchange.
“With current cost reduction, efficiency gains, vertical optimization and favourable geography mix mostly benefiting 2H/23 with a strong 4Q/23 cadence suggested, we opt to retain our conservative forecasts which likely remain among the street-low expectations,” said the analysts.
Stifel added that it maintained its “previous conservative stance” given continued “limited visibility” towards Curaleaf achieving the material margin expansion in 2H/23 implied by management's reiterated 2023 guidance.
In its investment thesis, Stifel noted that Curaleaf is the largest cannabis company in the world and the only one with “international optionality; an M&A track record of completing every transaction announced” and access to capital with the “largest equity and debt financings” in the history of the US cannabis industry.
Curaleaf is focused on cultivation, manufacturing and retailing of cannabis products in the US. It has developed its platform organically and through M&A with no cancelled deals and has favorably restructured terms on large acquisitions.
“In our view, this is mainly due to the strategic vision of the company's executive chairman (Boris Jordan) who has vast experience with rolling up fragmented, distressed and highly regulated industries, similar to that in US cannabis,” concluded the analysts.
Contact the author Uttara Choudhury at uttara@proactiveinvestors.com
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