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Beacon Securities Is Still Bullish on Curaleaf

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On Monday, Curaleaf Holdings (OTCMKTS:CURLF) announced that it completed the previously announced acquisition of Cura Partners on February 1. Cura Partners has manufacturing, distribution, marketing, and sales operations under the “Select” brand. The company also owns intellectual properties. The acquisition expanded Curaleaf’s operations to 53 dispensaries, 15 cultivation facilities, and 24 processing facilities spread across 14 states. Curaleaf plans to utilize Select’s wholesale model, lifestyle brand, and significant market presence on the West Coast to expand its business.

Changes in Curaleaf’s leadership

Following the closing of the Select acquisition, there were some changes in leadership roles. Neil Davidson, Curaleaf’s CFO, was promoted to COO. Michael Carlotti and Jason White joined the company as the new CFO and chief marketing officer, respectively. Recently, the company created the chief marketing officer position. Also, Select’s founder, Cameron Forni, will become the company’s president. He will focus on expanding the Select brand to other markets.

Beacon Securities reiterated its “buy” rating

After Curaleaf completed the acquisition of the Select brand, Russell Stanley of Beacon Securities reiterated his “buy” rating and target price of 25 Canadian dollars, as reported by Cantech Letter on Tuesday. In his research note to clients, he said, “This transaction marries Curaleaf’s league-leading retail footprint (now 53 dispensaries, or 79+ pro forma the pending Grassroots transaction) and geographic strength in the Eastern US, with Select’s wholesale dominance and branded product leadership in the Western US.”

As reported by Cantech Letter, Stanley stated that his forecast already included the Select values. He said that Curaleaf is trading at a discount compared to its peers. In his research, he said that Curaleaf trades at 5.5x his fiscal 2021 EBITDA estimates. The company was 28% lower than peers’ average of 7.7x. For fiscal 2020, he expects the company’s managed revenue and EBITDA to be $1.12 billion and $360 million, respectively.

Overall, analysts are bullish on Curaleaf. Among the eight analysts, seven analysts recommend a “buy,” while one recommends a “hold.” None of the analysts recommend a “sell.” As of Tuesday, analysts’ consensus target price was $16.24, which implies a return potential of 72.3%.

Stock performance

This year, Curaleaf has returned 14.9% as of Tuesday. The company’s stock price rose due to completing the Acres and Select acquisitions and winning the medical retail license in Utah. Last year, when cannabis companies were struggling, Curaleaf returned 26.6%. The stock price rose due to the company’s impressive third-quarter performance, management’s strong fiscal 2020 guidance, and optimism about the acquisition of Select and Grassroots Cannabis. Meanwhile, MedMen Enterprises (OTCMKTS:MMNFF), Charlotte’s Web Holdings (NYSEARCA:CWEB), and Cresco Labs (OTCMKTS:CRLBF) have lost 22.9%, 1.4%, and 13.1% of their stock value YTD, respectively.

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