One thing we could say about the analysts on Curaleaf Holdings, Inc. (CSE:CURA) – they aren’t optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. Bidders are definitely seeing a different story, with the stock price of US$4.89 reflecting a 28% rise in the past week. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.
Following the downgrade, the most recent consensus for Curaleaf Holdings from its ten analysts is for revenues of US$612m in 2020 which, if met, would be a substantial 245% increase on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 96% to US$0.0051. Prior to this update, the analysts had been forecasting revenues of US$825m and earnings per share (EPS) of US$0.007 in 2020. So we can see that the consensus has become notably more bearish on Curaleaf Holdings’s outlook with these numbers, making a pretty serious reduction to this year’s revenue estimates. Furthermore, they expect the business to be loss-making this year, compared to their previous forecasts of a profit.
The consensus price target fell 8.8% to CA$14.25, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Curaleaf Holdings analyst has a price target of CA$22.00 per share, while the most pessimistic values it at CA$7.00. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. The analysts are definitely expecting Curaleaf Holdings’s growth to accelerate, with the forecast 245% growth ranking favourably alongside historical growth of 90% per annum over the past three years. Compare this with other companies in the same industry, which are forecast to grow their revenue 39% next year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Curaleaf Holdings to grow faster than the wider industry.
The Bottom Line
The biggest low-light for us was that the forecasts for Curaleaf Holdings dropped from profits to a loss this year. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. With a serious cut to this year’s expectations and a falling price target, we wouldn’t be surprised if investors were becoming wary of Curaleaf Holdings.
With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. We have estimates – from multiple Curaleaf Holdings analysts – going out to 2024, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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