Curaleaf Price Target Spikes, Fueled By German Cannabis Legalization Changes — ROTH MKM Explains

Strategic Outlook And Earnings Forecast

According to ROTH MKM, a privately held investment banking company, cannabis multi-state operator Curaleaf Holdings, Inc. CURA CURLF is poised to unveil its fourth-quarter earnings for 2023 on March 6, with projections indicating a modest rise in revenue and EBITDA.

This anticipated growth is credited to Curaleaf's strategic positioning in essential markets such as Maryland and New Jersey and improved cost management.

Nevertheless, challenges like price competition and underused facilities are expected to moderate these improvements.

The company has forecasted a slight sequential growth in revenue, aiming for better margins and cash flows through focused 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 below the consensus expectation of $337.7 million.

The adjusted EBITDA is predicted at $77.9 million, showcasing a decline from the previous year but surpassing consensus estimates of $73.9 million. Curaleaf's strategic market leadership in Maryland and New Jersey is anticipated to counterbalance the impacts of seasonal promotions and wholesale price reductions.

With Germany's recent move towards cannabis legalization, ROTH MKM has revised its price target for Curaleaf from $4.00 to $7.00, underscoring the potential for significant growth in the latter half of 2024.

Operational Efficiency And Market Expansion

Curaleaf is expected to highlight improved operational efficiencies and leverage its extensive network post-consolidation of underperforming assets in challenging markets. Enhanced cash flow generation, attributed to these consolidation efforts, and a steady product mix are anticipated.

The company's strategic investments in Germany position it well to capitalize on the expanding European cannabis market, promising substantial sales and profit growth into 2025.

Future Prospects

ROTH MKM's analysis suggests that Curaleaf's near-term focus on operational efficiencies will drive margin improvements and cash flow, prioritizing these over top-line growth. The company's unique position with exposure to the European Union, coupled with accelerating revenue growth as Germany relaxes medical cannabis regulations, supports a bullish outlook.

The upward revision of the price target to $7.00 reflects confidence in Curaleaf's growth trajectory, underscored by the anticipated regulatory changes and market expansion opportunities in Germany.

Valuation

According to ROTH MKM, the adjustment to Curaleaf's price target to $7.00, up from $4.00, is grounded on a reevaluation to a 17x '24 EV/EBITDA multiple, reflecting an increase from the prior 10x.

This enhancement mirrors ROTH MKM's confidence in Curaleaf's ability to command a premium over its top Multi-State Operator (MSO) counterparts, credited to its extensive national presence and expanding footprint within the European Union.

"Our $7.00 price target (from $4.00) is derived using a 17x '24 EV/EBITDA multiple (from 10x) on our EBITDA estimate of $330.4M,” reads the report.

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