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Analysts Recommend a ‘Buy’ for Curaleaf before Its Q4 Earnings


Mar. 13 2020, Published 12:27 p.m. ET

As of March 12, Curaleaf Holdings was trading at 5.20 Canadian dollars—a fall of 36.4% since the beginning of this year. The weakness in the cannabis sector appears to have dragged the company’s stock price down. This year, the ETFMG Alternative Harvest ETF (NYSE:MJ) and the Horizons Marijuana Life Sciences Index ETF (TSE:HMMJ) have fallen by 42.1% and 41.1%, respectively. Curaleaf’s impressive third-quarter performance and the completion of the Select brand and Acres acquisition offset some of the declines. Despite the fall, the company has outperformed its peers. YTD, MedMen Enterprises (OTCMKTS:MMNFF), Cresco Labs (OTCMKTS:CRLBF), and OrganiGram Holdings (NASDAQ:OGI) have fallen by 71.4%, 61.0%, and 40%, respectively. The company will likely report its fourth-quarter earnings on March 24. Let’s look at analysts’ recommendations before the company’s earnings.

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Analysts’ ratings for Curaleaf

Analysts favor a “buy” rating for Curaleaf. As of Thursday, nine analysts covered Curaleaf. Among the analysts, eight recommend a “buy,” while one recommends a “hold.” None of the analysts recommend a “sell” rating for the stock. From the above graph, you can see that more analysts have started covering the stock in the last 12 months. As of March 2019, there were only six analysts compared to nine analysts now. Let’s look at analysts’ recommendations for Curaleaf’s peers.

  • Analysts favor a “hold” rating for MedMen. Among the seven analysts, five recommend a “hold,” while two recommend a “sell” rating.
  • Analysts favor a “buy” rating for Cresco Labs. All of the 13 analysts recommend a “buy.”
  • For OrganiGram, 12 of the 16 analysts that follow the company recommend a “buy.”
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Analysts’ target price

From the above graph, you can see that analysts’ consensus target price has increased by 2% from 15.66 Canadian dollars in the previous month to 15.97 Canadian dollars this month. The new target price represents a 12-month return potential of 207.1% from its stock price of 5.20 Canadian dollars.

From the above graph, you can see that analysts’ consensus target price has declined since August 2019. Weakness in the cannabis sector appears to have prompted analysts to cut their target prices. Meanwhile, on February 4, Russell Stanley of Beacon Securities reiterated his “buy” rating and a target price of 25.00 Canadian dollars, as reported by Cantech Letter. Stanley expects the Select brand acquisition to boost Curaleaf’s retail footprint in the eastern US.

As of Thursday, MedMen, Cresco Labs, and OrganiGram were trading at a discount of 310.7%, 332.4%, and 220.6% from their respective target prices.

My take on Curaleaf

I’m bullish on Curaleaf. The company’s recent acquisition of Acres and Select has expanded its retail footprint. Earlier this month, the company announced that it will acquire BlueKudu. Along with these acquisitions, opening new dispensaries could drive the company’s sales. For the fourth quarter, analysts expect Curaleaf to report revenues of $80.7 million—growth of 152.5% YoY. Sequentially, the revenue could rise by 30.5%. Also, analysts expect the company to report an adjusted EBITDA of $14.0 million. Until now, very few cannabis companies have managed to report a positive EBITDA.


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