Curaleaf Holdings, Inc. (OTCQX:CURLF) posted its financial results Monday for the second quarter ended June 30, 2022.

The Massachusetts-based cannabis company beat the estimates on its total second-quarter revenue, reaching $338 million, compared to $312 million in the same period last year. 

Adjusted EBITDA was a gain of $86.18 million, versus $84.37 in the same quarter of 2021. 

Net loss amounted to $28.33 million or $0.04 per share, compared to a loss of 4.85 million or $0.01 per share in the second quarter of the previous year. 

The Analyst

Cantor Fitzgerald's Pablo Zaunic kept an 'Overweight' rating on Curaleaf stock, lowering the price target to $13.70 from $14.60. 

The Thesis

Curaleaf sales improved 8% sequentially, compared to the 5% growth that Green Thumb Industries (OTC:GTBIF), but still revenue came in higher than consensus ($334 million) and Cantor's estimates of around $327 million. 

The company saw a drop in net wholesale, and the management attributed this to a "reassessment of California and Colorado wholesale markets." Zuanic also thinks that the company probably sold more of its product via its store network, especially in New Jersey, where it added seven stores in the second quarter, bringing the total to 135 as of the end of June. 

The analyst lowered the price target to address slightly lower sales estimates. 

Curaleaf management projected to be somewhere at the lower end of its full-year revenue guidance range of $1.4-1.5 billion, partly because of wholesale rationalization and permit delays for the Bordentown store in New Jersey to start recreational sales. 

The company provided flat-to-low single digits sequential growth guidance for the third quarter but expects a strong $40-50 million increase in the fourth quarter thanks to the Tryke deal closing and is still on track to reach the 28% EBITDA margin target for the year. According to the analyst, improved sales in New Jersey, and more vertical integration in key markets, combined with the margin accretion from Tryke should help the company achieve higher margins in the second half of the year. 

Curaleaf international sales improved 50% year-over-year, hitting $7.8 million per the analyst's estimates. While these figures are notably below the overseas revenue achieved by Aurora Cannabis (NYSE:ACB) and Tilray (NASDAQ:TLRY), unlike other multi-state operators, Curaleaf has European optionality, consisting of 250,000 square feet of capacity in Portugal, with sales in the United Kingdom, Israel and Germany.    

"We do not believe in the long term with interstate commerce, a broadened scope of retailing, and even a three-tier system, that small California brands will "rule the world." We see the biggest and most profitable multi-state operators (with the right balance sheet) as the best-positioned to benefit in that future disruptive world – Curaleaf should be one of those," Zuanic concluded.

Price Action 

Curaleaf shares closed Monday market session 1.97% higher at $5.69 per share. 

Photo: Benzinga Edit; Source: Pixabay