What Analysts Think About Curaleaf in Fiscal 2020

Curaleaf (CURLF) seems to be in a good position in 2019 compared to other cannabis players. The company reported strong third-quarter fiscal 2019 results in November. Notably, Curaleaf’s stock also did well this year compared to its cannabis peers. In Is Curaleaf a Good Buy in December?, we discussed what analysts think about Curaleaf’s stock after its earnings results. Let’s take a look today at analysts’ views on Curaleaf’s performance in fiscal 2020.

What analysts think about Curaleaf’s revenue in fiscal 2020

For fiscal 2020, analysts expect a substantial increase in Curaleaf’s revenue. In fiscal 2019, the company is expected to report revenue of $259.8 million. For fiscal 2020, analysts expect a 284% year-over-year increase to $997.9 million in revenue. For fiscal 2019, after its third-quarter fiscal 2019 earnings, analysts increased the revenue estimate. In November, analysts revised the revenue estimate to $262 million compared to $254 million prior to earnings. In December, analysts slightly lowered the estimate to $261 million.

For fiscal 2020, prior to earnings, analysts expected the company to report $868 million in revenue. However, after the earnings results, they increased it to $987 million in November. In December, they lowered it again to $973 million.

Why analysts are bullish about Curaleaf’s performance in 2020

It’s not surprising that analysts are bullish about Curaleaf. In November, Curaleaf reported strong third-quarter fiscal 2019 results despite the struggling marijuana industry. The company saw a 189% year-over-year increase in revenue to $61.8 million. Revenue increased sequentially by 27%. Moreover, the company reported a positive adjusted EBITDA of $9 million in comparison to a loss of $3.2 million in the comparable period. This is a good sign for Curaleaf as most of its Canadian peers are struggling with profitability. To learn what analysts think of the Canadian marijuana company Canopy Growth in fiscal 2020, take a look at Canopy Gets Estimates Revised by Analysts for 2020.

Note that the reasons for the disappointing performance of Canadian cannabis companies were mostly related to slower store rollouts in Canada and rising black market sales. Black market sales are a concern in the US as well.

Curaleaf’s position in Florida

Curaleaf has strengthened its position in the US cannabis market. Cannabis is not legal in every state in the US. However, the demand keeps rising in the US states where it is legal. Currently, 33 states and the District of Colombia have legalized medical cannabis. Meanwhile, 11 states and the District of Colombia have legalized recreational cannabis. Curaleaf has a good footing in the Florida market where medical cannabis is legal. Curaleaf mentioned in its third-quarter earnings call that organic growth in the Florida medical cannabis market helped in the growth in revenue for the quarter. Florida legalized medical cannabis in 2016. Floridians are now working on getting recreational cannabis legalized by 2020.

I discussed in A Deep Dive into the Top Cannabis Retailers in Florida how Curaleaf operates 28 dispensaries in Florida as of November 28, 2019. It is in third place after Trulieve, which has 40 dispensaries, and Surterra Wellness, with 36 dispensaries. Currently, Trulieve dominates the medical cannabis space in Florida, with 50% of total medical cannabis sales. 

Likewise, MedMen is working on strengthening its position in Florida. The company opened three new dispensaries in Florida in St. Petersburg, Key West, and Pensacola. So, some analysts worry about the competition Curaleaf has in Florida. 

Will CURLF’s profitability increase in fiscal 2020?

Analysts expect Curaleaf’s profitability to rise drastically in fiscal 2020. For fiscal 2019 full year, analysts didn’t revise the EBITDA estimate of $31 million after earnings. However, in December, they lowered the estimate slightly to $30 million.

For fiscal 2020, analysts estimated $300 million in November after earnings. In December, they lowered the estimate to $270 million. However, this estimate still shows tremendous growth on a year-on-year basis. The medical cannabis industry is booming globally. Slowly but steadily, the US is also starting to recognize the medical benefits of cannabis. Hence, many US states are working on getting at least medical cannabis legalized by 2020. The hope that this will happen could be what’s driving the revenue and profitability expectations in the US market.

In addition, analysts feel Curaleaf could see a gross income of $518 million in fiscal 2020 as of December. In November, they expected a gross income of $520 million.

Here’s how Curaleaf’s peers’ prospects look for fiscal 2020:

  • MedMen could report revenue of $213.9 million and an EBITDA loss of $63.1 million in fiscal 2020.
  • Cronos could report revenue of 146.1 million Canadian dollars and an EBITDA loss of 54.2 million Canadian dollars in fiscal 2020.
  • Aphria could report revenue of 593.4 million Canadian dollars and an EBITDA of 32.5 million Canadian dollars in fiscal 2020.

What analysts think about CURLF stock

After earnings, analysts’ recommendations on the stock remained the same, at a “buy.” The average target price was lowered to $11.5 from $11.83. As of December 31, the buy recommendation remains. However, analysts further lowered the target price to $10.44. The new target price shows the stock has an upside potential of 76% from its current closing price. CURLF stock closed at $5.92 yesterday.

Currently, only four analysts cover the stock. Notably, out of the four, 75% give the stock a “buy” rating while the rest recommend a “strong buy.” In comparison, MedMen (MMNFF) has a majority “hold” rating with a target price of 1.7 Canadian dollars. Canadian peer Aphria (APHA) has a majority “buy” rating with a target price of 12.4 Canadian dollars. Meanwhile, Cronos (CRON) has a majority “hold” rating with a target price of 12.5 Canadian dollars.

On December 25, analysts at Needham & Company LLC reissued their “buy” rating on Curaleaf’s stock with a target price of $7.25.

Year-to-date, Curaleaf has gained 17%. In December, it’s down 3%. Meanwhile, peer MedMen is down 5%, Cronos is down 3%, and Aphria has lost 0.21%.

So, the year-over-year growth for Curaleaf looks promising. Plus, how the expansion of Cannabis 2.0 works in the US market will help determine CURLF’s 2020 performance. However, various factors could affect the company. Marijuana is still not legal at a federal level. Moreover, Trump also said recently that he could choose to ignore Congress’ laws protecting states from federal interference.

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