Initiating Coverage: Curaleaf Holdings

We are initiating coverage of Curaleaf Holdings (TSX, OTC) with a “Buy” rating. Curaleaf’s strengths, especially its strategic international expansion, outweigh its challenges. We believe that further legalization in key states and regulatory progress in Europe will drive the company’s growth.

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Strengths of Curaleaf Compared to Its Peers

Curaleaf has a significant market presence, operating in 17 U.S. states and expanding internationally. Its strong retail network and diverse product offerings give it a competitive edge. Strategic acquisitions, like Can4Med, enhance its distribution in Europe, positioning it well for future growth. Its revenue mix shows a strong retail segment, supported by over 900 wholesale partner accounts, highlighting robust market penetration and efficiency.

Weaknesses of Curaleaf Compared to Its Peers

Curaleaf faces challenges with its current ratio, which is below both the median and average, indicating lower liquidity. Its total liabilities vs. assets ratio is higher than its peers, suggesting greater financial leverage and potential risk. Additionally, Curaleaf’s recent EBITDA growth is below the median and average, reflecting short-term operational inefficiencies. Its lower Capital Expenditures (CapEx) Margin indicates less investment in future growth compared to competitors, which may impact long-term revenue potential.

Our Forecasts

Based on our analysis, we rate Curaleaf as a “Buy” due to its strong market presence and strategic international expansion. We calculate Curaleaf’s blended fair value to be $5.61, offering a potential upside of 20% from its current price of $4.68. This valuation considers the strengths of its diverse product offerings and market expansions, along with the catalysts of regulatory advancements in key markets, suggesting a promising return on investment for shareholders.

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