Analyst Previews Curaleaf Earnings: 'Bellwether Of The U.S. Cannabis Industry'

Shares of U.S. multi-state cannabis operator Curaleaf Holdings Inc. CURLF traded lower by 3.6% on Thursday morning, but one analyst has high hopes for the company’s fourth-quarter earnings report next week.

The Analyst: On Thursday, Roth Capital Partners analyst Scott Fortune reiterated his Buy rating and $20 price target for Curaleaf.

Related Link: 3 Reasons Cannabis Stocks May Be Headed Lower

The Thesis: In his preview note, Fortune said Curaleaf’s fourth-quarter earnings report is important for the entire cannabis space given the company is the “bellwether of the U.S. cannabis industry.”

“We believe the results will indicate the direction for the rest of the industry and are expecting a relatively strong quarter in terms of revenue growth, with integration still weighing on profits,” Fortune said.

He said expectations for the fourth quarter are high after Curaleaf’s impressive third-quarter numbers, which demonstrated the power of Curaleaf’s aggressive strategy of licensing wins and acquisitions. Looking ahead to 2021, Fortune said Arizona and New Jersey will be key growth markets for Curaleaf. Once the company has fully integrated Grassroots and its other major acquisitions, Fortune said investors should expect an inflection in Curaleaf’s profitability.

Roth is calling for a fourth-quarter EPS loss of 2 cents, down slightly from a 1-cent loss in the third quarter. The firm is also targeting $239.5 million in revenue, up 31.3% sequentially.

Looking ahead to 2021, Fortune is calling for a full-year EPS of 14 cents on revenue of $1.25 billion, up 96.8%.

Fortune says Curaleaf shares currently trade in-line with the rest of the U.S. MSOs at around 6 times 2022 sales. However, he says the stock will likely trade at a premium to its U.S. cannabis peers as it emerges as an industry leader over time.

Curaleaf is reporting fourth-quarter earnings on March 9 after the market close.

Benzinga’s Take: Curaleaf will certainly report some impressive growth numbers next week, and there is currently tremendous positive momentum in the U.S. legalization movement. The key factor to the stock’s immediate reaction to earnings will be just how much expectations are already priced into the stock after it has gained 230% in the past year.