Cantor Fitzgerald: Curaleaf's Clever European Plans And Co. Chairman Opines On Schumer Bill

Cantor Fitzgerald's Pablo Zuanic recently spoke with Curaleaf CURLF chairman Boris Jordan about federal and state regulatory changes and the company’s plans both here and across the pond. 

The Analyst

Zuanic reiterated an ‘Overweight’ rating and kept the price target of $26.50 as well as estimates on Curaleaf’s stock. 

Call Highlights 

Jordan said Curaleaf is optimistic with regards to regulatory changes both at federal and state levels, Zuanic wrote in a Thursday analyst note.

The cannabis giant's chairman is expecting to Sen. Chuck Schumer’s marijuana reform bill to be introduced this July and views it as a “compromise bill” that will contain provisions regarding banking and tax reform. Though Jordan said he believes the bill will “have enough wording that would allow the US exchanges (and TSX) to uplist US (cannabis) plant-touching companies.” 

If this is the case, multi-state operators could see higher asset values, because Canadian companies will be able to join the U.S. space through acquisitions, hence bringing “more investment funds to participate in the thriving multi-state operator sector,” said the analyst. 

According to Jordan, if the bill passes both chambers, President Biden will probably sign it.

Even if interstate trade is not regulated under the bill, Jordan expects to see it in the near future, for which Curaleaf is getting ready. 

• State Level 

Breakdown by states, Jordan projects for New Jersey recreational sales to commence this November, while in Connecticut by the third quarter of the year. Adult-use sales in New York may not begin before the first quarter of 2023, but Curaleaf expects flower to be introduced in the state's medical program before the end of July, noted Zuanic. 

“Relative to expectations, we believe all these items are positive news for the multi-state operators group,” Zuanic wrote. 

• Company Plans – National And International Expansion  

During the call, Zuanic did not ask the company to reconfirm its second-quarter sales guidance with a $305-315 million range indicating an 18-22% sequential increase, although Jordan acknowledged a “mild slowdown” due to changes in consumer spending behavior post-pandemic. 

“We would focus more on the company’s strong position in states going rec soon (NJ/CT), its large cultivation footprint in NY to serve likely robust med flower demand, and the current expansion plans nationwide (stores, cultivation, new formats, brand rollout),” Zuanic said. 

The analyst added that Curaleaf is making clever moves in regards to its European-focused operations, as it plans to become a global leader and attain a similar market scale in Europe as it has in the U.S. where it is number one by revenue. 

Jordan projects that the European cannabis market could be as large, or larger, than North America's. For that reason, the company decided to get in early, via its acquisition of EMMAC Life Sciences for $286 million. Curaleaf seems confident that countries like Portugal, Israel and Germany are close to legalizing adult-use cannabis, which is why the company has focused on scaling up capacity in Portugal and Spain. 

In the U.S., Curalaef is expected to have as much as 2 million square feet of company-wide cultivation space by the end of the year, with plans to further expand. The key states where Curaleaf is operating - with around $100 million in sales in 2020 - include Florida, Massachusetts, Arizona, New York, New Jersey, Illinois and Pennsylvania. 

In addition, Curaleaf's Jordan said the company has no plans to enter the psychedelics space but that it plans to soon roll out a CBD wellness line across the nation. 

Year-to-date Curaleaf Holdings CURLF shares gained 15%, compared to AdvisorShares Pure US Cannabis ETF MSOS, which is up 10%, AdvisorShares Pure Cannabis ETF (NYSE: YOLO), which gained 24%, and SPDR S&P 500 SPY that advanced +14%.

Price Action 

Curaleaf shares closed Wednesday’s market session 2.93% lower at $14.09 per share. 

Photo by Tim Foster on Unsplash