Strategic outlook and earnings forecasts
Second ROTH MKMa privately held investment banking firm, multistate cannabis operator Curaleaf Holdings, Inc. TREATMENT CURLY is set to unveil its fourth-quarter earnings for 2023 on March 6, with projections indicating a modest increase in revenue and EBITDA.
This expected growth is attributed to Curaleaf’s strategic positioning in essential markets such as Maryland and New Jersey and improved cost management.
However, challenges such as price competition and underutilized facilities are expected to moderate these improvements.
The company projected slight sequential revenue growth, targeting improved margins and cash flows through targeted operational execution and consolidation activities.
Revenue and earnings expectations
ROTH MKM estimates Curaleaf’s revenue will reach $334.5 million, reflecting a steady year-over-year increase. This forecast is slightly lower than consensus expectations of $337.7 million.
Adjusted EBITDA is forecast at $77.9 million, down from the prior year but beating consensus estimates of $73.9 million. Curaleaf’s strategic market leadership in Maryland and New Jersey is expected to offset the impact of seasonal promotions and wholesale price reductions.
With Germany’s recent move towards cannabis legalization, ROTH MKM revised its price target for Curaleaf from $4.00 to $7.00, underlining the potential for significant growth in the second half of 2024.
Operational efficiency and market expansion
Curaleaf is expected to highlight improved operational efficiencies and leverage its vast post-consolidation network of underperforming assets in challenging markets. Higher cash flow generation is expected, attributed to these consolidation efforts, and a stable product mix.
The company’s strategic investments in Germany position it well to take advantage of Europe’s expanding cannabis market, promising substantial sales and profit growth in 2025.
Future perspectives
ROTH MKM analysis suggests that Curaleaf’s near-term focus on operational efficiency will lead to improvements in margins and cash flow, prioritizing these over revenue growth. The company’s unique position with exposure to the European Union, coupled with accelerating revenue growth as Germany loosens medical cannabis regulations, supports a bullish outlook.
The upward revision of the price target to $7.00 reflects confidence in Curaleaf’s growth trajectory, underlined by expected regulatory changes and market expansion opportunities in Germany.
Assessment
According to ROTH MKM, Curaleaf’s price target adjustment to $7.00, up from $4.00, is based on a revaluation to a 17x ’24 EV/EBITDA multiple, reflecting an increase from 10x precedents.
This improvement reflects ROTH MKM’s confidence in Curaleaf’s ability to command a premium over its major multistate operator (MSO) counterparts, attributed to its large national footprint and expanding footprint within the European Union.
“Our price target of $7.00 (from $4.00) is derived using a ’24 EV/EBITDA multiple of 17x (from 10x) on our EBITDA estimate of $330.4 million,” we read in the report.
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