Curaleaf (CURLF) reported impressive fiscal 2019 third-quarter earnings results on November 19. Considering its better-than-expected results, GMP Securities expects a potential upside of more than 200% in its stock over the next 12 months. Let’s see why.
GMP sees huge upside potential in Curaleaf
On November 20, a Cantech letter discussed GMP Securities’ analyst Robert Fagan’s views about Curaleaf. The analyst feels Curaleaf had good cost control in the third quarter, with SG&A (selling, general, and administrative expenses) up 18% sequentially. He feels this made the company achieve a positive EBITDA of $9 million, which was in line with his estimate of $9.5 million. Curaleaf’s revenue of $62 million was below Fagan’s estimate of $67 million.
Fagan said, “Overall, we are encouraged by CURA’s solid Q3 results demonstrating the company is executing well on growing profitably. Q4 aside, CURA’s growth outlook remains robust with the 2020 guidance intact. Target based on 27.5x 2020 EBITDA of $370 million-plus $185 million of EBITDA we assume acquired.”
On its third-quarter earnings call, Curaleaf’s management said it expects strong sequential growth in fiscal 2020. The company expects revenue of $1 billion–$1.2 billion in fiscal 2020. For the fourth quarter, its management expects its revenue to rise 20%–30% sequentially.
GMP now expects Curaleaf to generate fiscal 2019 revenue and EBITDA of $226.1 million and $27.0 million, respectively. For fiscal 2020, GMP expects Curaleaf to generate revenue and EBITDA of $1.065 billion and $392.1 million, respectively.
Fagan reiterated his “buy” rating on the stock. He also gave it a price target of 24 Canadian dollars. This target represents a potential upside of 228% over the next 12 months as of the time Cantech reported.
Excellent third-quarter results
EBITDA is reflective of a company’s operating performance. Many of Curaleaf’s Canadian cannabis peers reported negative EBITDAs in their recent quarters. Meanwhile, Curaleaf reported EBITDA of $9 million in the third quarter. The company also showed a 189% YoY increase in revenue to $61.8 million.
In comparison, Aurora Cannabis reported EBITDA of -39.67 million Canadian dollars. To know more about Aurora’s results, read Aurora Cannabis: Good or Bad News for Its Q1 Earnings? Cronos Group and Canopy Growth (CGC) (WEED) reported EBITDAs of -23.93 million Canadian dollars and -155.7 million Canadian dollars, respectively. For more on Cronos’s and Canopy’s results, check out Cronos Group’s Q3 Earnings: Good or Bad News? and Canopy Growth Stock Falls after Weak Q2 Earnings.
How do others feel about Curaleaf now?
After its second-quarter results, Beacon Securities analyst Russell Stanley expressed his views about the company and its stock. At that time, he’d expected its Select and Grassroots acquisitions and its third-quarter results to drive its stock. Hence, he reiterated his price target of 25 Canadian dollars and his “buy” rating on the stock.
Additionally, Cowen and Company analyst Vivien Azer gave CURLF an “outperform” rating and a price target of $10.50.
On November 20, MKM Partners increased the fair value for CURLF to 8 Canadian dollars from 6 Canadian dollars.
Ratings and target price
Currently, of the three analysts covering Curaleaf stock, two have given it “buy” ratings (down from five before its earnings release). One has rated the stock as a “strong buy.” None rate it as a “hold” or “sell.” The price target on the stock is set at $11.5. This target represents an upside potential of 81% from Curaleaf’s current trading price. It closed at $6.3 in yesterday’s trading.
Meanwhile, peer Aphria (APHA) has a majority “buy” rating on its stock and a price target of 12.4 Canadian dollars. Cronos (CRON) has a majority “hold” rating and a price target of 12.8 Canadian dollars. Aurora Cannabis (ACB) has a majority “hold” rating and a price target of 5.7 Canadian dollars.
Curaleaf stock has soared since its third-quarter results. It’s up 15.2% since November 19. In November alone, it’s up 33% despite turmoil in the overall cannabis space. Year-to-date, the stock has gained 33.7%.
The stock closed with a gain of 15.2% yesterday. Meanwhile, ACB gained 12.8%, Cronos gained 2.5%, and Canopy Growth gained 15.1% on the day.
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