Curaleaf CURLF Stock Forecast & Analysis

Curaleaf CURLF stock forecast is listed below given for Q3; one of the biggest keys to cannabis investments.  But I am revising this somewhat based on the new Curaleaf Q4 financial data just released.  Curaleaf posted a solid year of performance doubling revenue year-over-year.  But, the final quarter saw only a 1% increase in revenue.  And, future revenue is downgraded to ~$1.3B – ~$1.4B versus market expectations of approximately $1.6B.  However, despite that downgrade, Curaleaf saw improved margins for the final quarter showing that they are getting more efficient at producing cannabis (Follow along in the CURLF stock Forum).

So, less revenue but, higher margins; how will that play out for the company’s stocks, CURLF Stock?

A mere 1% increase in revenue was all that we got from Curaleaf this quarter.  Given all of the kerfuffle in Eastern Europe and the perceived attachment of Boris Jordan to Russia, CURLF could have used a break.  All cannabis stocks are heavily beaten down.  But, there is value here in these stocks.  It is intrinsic value.  But, the market is not ready to realize this.  However, there are winds of change happening and, I firmly believe that this will be a huge year for cannabis investments.

Cannabis Companies and Taxation

One of the things I am most focused upon with cannabis stocks is the taxation level that these companies have to pay in taxes.  I did a comparison of a few cannabis companies are paying versus a few other, non-cannabis companies.  Cannabis companies are not permitted to write off equipment and expenses since the product is Schedule I.  Some companies can get away with a few things because they do other things within the course of their business.  But, mostly, they are paying approximately 15% in taxes versus an effective rate of about 4% – 5% with other companies.

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Curaleaf Financial Data

Curaleaf Gross Profits

A mere 1% in revenue growth for the quarter for the biggest cannabis stock sounds bad, but, Curaleaf also doubled its revenue Year-Over-Year.  Plus, there are expectations of an increase of 15% from 2021 to 2022 to take Curaleaf revenues to $1.35B.  However, I am already seeing reports for $1.89B for 2023.  Given these projections, you can see that the long game is playing out as Curaleaf management has continually iterated in its investor presentations.  The message has always been consistent.  But, investor sentiment has not nor, has investor sentiment been consistent with expectations even though Curaleaf management has guided otherwise.

Margins remain about the same from a cost of goods versus revenues perspective.  However, EBITDA profits increased and this was not driven via gross profits.  Therefore, it must have come from an operational standpoint.

Curaleaf Operating Profits

On a relative basis, operating profits 5% QoQ despite the 1% increase in revenue.  This shows that Curaleaf is getting more efficient from an operational perspective.  The fact that revenue moved upward so little, but operating efficiencies improved on a non-linear basis are important to me.  For Q4, Curaleaf moved its operating efficiencies to 36.7% from 45% (It is a ratio so, you want the lowest possible number).

Further, I expect that Curaleaf could improve even more operationally.  And, if revenues do increase as they are over the course of the next four quarters, the potential to see operating efficiencies near the 32.5% level.  Ranges between 30% – 35% are where the top-performing companies come in at.  Given economies of scale, increasingly higher products numbers working through the system, this is no large feat for Curaleaf.

This is an opportunity for long-term investors because the increased revenue gains will show that Curaleaf will be able to bring in larger profits on a percentage basis.  For now, investors are not realizing this intrinsic value.

Curaleaf EBITDA & Net Earnings

As I mentioned, EBITDA improved and was driven by relatively the improvements in operating efficiencies.  But, I also see the potential for gross margins to improve even more; this will improve EBTIDA & Net earnings profits.  As of now, gross margins are 50% on $320M revenue and operating efficiencies are 36.7%.  But, if revenues increase as we expect, and so do margins because of marginal profits via economies of scale, this is where the real bang-for-the buck comes in.

On the probabilistically $1.35B for 2022, an increase of ~$100M in revenue Year-Over-Year, could easily push margins upwards for the year.  If Curaleaf were to hit an additional 10% in gross profits on top of the current ratio, that amounts to $10M trickling downward to EBITDA and Net Earnings.

Factor in a potential 5% more in operating efficiencies, then this is where you really see the potential for profit increases.

Curaleaf Cash On Hand

On a comparative basis, Curaleaf has a low amount of cash relative to debt.  But, should they turn Net Earnings break-even, things change rapidly and there can be some real adjustments to the outlook of Curaleaf as they potentially do acquisitions and more CapEx.  Get to break even, and you no longer have a cash burn rate but, a positive net working capital gain.

Look for the potential of this turn around.

Curaleaf Total Equity

Curaleaf is also not growing total equity too rapidly on a comparative basis when you look at other companies.  Equity, via the accumulation of assets at a rate that is greater than debt, is the engine that gives a company the ability to generate revenue & profits.  The rate of increase here is not top-performing.  But, the cash burn rate may be the factor driving this.  And, as organic growth continues to push margins higher, if Curaleaf can capitalize on this, they potentially can start generating more and more total equity.

Curaleaf CURLF Stock Forecast

Curaleaf CURLF Stock Discounted Cash Flow Calculation

I have been making necessary shifts in the DCFs with regard to performance by the respective company as well as overall investing environment.  Interest rates are higher and I have to adjust for that.  Time is shifting and so, an investment today with a 5-year outlook will be different than something that occurred just three months ago.  These are thing constant shifts that require me to continually update this information.

Given that, the above is the latest intrinsic value for Curaleaf, CURLF Stock.

Is CURLF Stock a Good Investment

By assets, market capitalization, and revenue, Curaleaf is the biggest cannabis company there is.  And, as far as cannabis investments, I think this stock has a lot of potential.  However, I am always reluctant to throw too much weight on CURLF Stock.  But, I even have to balance that.  Curaleaf’s numbers are under-performing against the likes of, say, Green Thumb or Trulieve.  While I believe that all of these cannabis stocks will head higher, I also believe that there is a first-to-market mentality in looking at these companies.

Curaleaf is, on the one hand, invested in by big names and far, far more bigger names will step in and push CURLF Stock upward.  It will create a feedback mechanism.  But, when you start comparing numbers, I believe Green Thumb & Trulieve, and many others, will start to outperform CURLF Stock.  That may cap Curaleaf.  That may be the difference maker.

At the same time, being a company of this size will also merit management achieving big things including looking at the bottom line and make necessary changes.  Look for these kinds of things to occur in the future and, that could be very supportive long term for CURLF Stock.

Curaleaf Stock Financial Data

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