Curaleaf Holdings, Inc. (OTC:CURLF) reported its third-quarter financial results Tuesday, revealing a total revenue of $317.13 million, up by 74% year-over-year from $182.41 million and a 69% year-over-year improvement in adjusted EBITDA, which came in positive at $71 million.
Boris Jordan, the company’s executive chairman, said Monday that despite facing “some transient headwinds,” Curaleaf “continued to execute well against our strategic initiatives, prioritizing growth and gaining market share.
“As a result, we remain on track to achieve our $1.2 to $1.3 billion annual revenue guidance, albeit at the lower end of the range, representing growth of over 90%,” Jordan highlighted.
In addition, the company’s management also called for full-year EBITDA margins of 25% compared to 30% before.
In his latest note issued Monday, Cantor Fitzgerald’s analyst Pablo Zuanic estimated that EBITDA margins would need to improve by 400bp seq (to 26.5%) in the fourth quarter in order for Curalef to reach the full-year target.
The Analyst
Zuanic maintained an overweight rating while lowering the price target on Curaleaf’s stock to $18.50 from $20, based on reduced margin estimate.
The Thesis
The analyst pointed out that one-off issues combined with transient regulatory issues in the northeast, citing illicit market which is gaining share post decriminalization, as well as price competition in Florida and California, have negatively affected margins.
“We would certainly not call this a 'Marlboro Friday' type of event, but would be skeptical of other companies guiding for >40% EBITDA margins by 2022 or 20223,” Zuanic said.
Curaleaf As A Core Holding In Any US MSO Portfolio
The company is currently present in 23 states with 123 retail locations including the recent acquisition of Tryke, with its capacity of 4.4 million square feet, including 2.5 million of outdoor growth recently acquired in Colorado through a deal with Los Suenos deal.
Moreover, Curaleaf is ramping up in the innovation department, with new product doormats and brands.
Zuanic estimates the Tryke deal will be closed in July 2022, with the new brand launched in other states shortly after.
“Curaleaf should be a core holding in any US MSO portfolio because of its breadth and depth, but also because, in our view, it is better placed than most MSOs to face potential disruptive changes at the federal level, like interstate trade,” Zuanic said, adding that the company will “make use of its scale…likely to gain share in key growth markets…and to put pressure on MSO peers.”
CURLF Price Action
Curaleaf's shares traded 3.97% lower at $9.91 per share at the time of writing Tuesday late morning.
Photo: Courtesy of Simon Abrams on Unsplash
