Cannabis company Curaleaf draws downgrade to hold at Benchmark, while Wedbush sticks to outperform

Curaleaf Holdings Inc. drew a downgrade at Benchmark from buy to hold from Benchmark Research, while Wedbush opted to stick to its outperform rating after the cannabis company’s first-quarter results.

Benchmark analyst Mike Hickey said Friday that Curaleaf Holdings
CURLF,
+5.88%

CURA,
+5.41%
faces uncertainty in the U.S. cannabis markets, despite “solid” first quarter results released Wednesday by the company.

Curaleaf stock rose 5.9% on Thursday. The stock has fallen 33% in 2023, compared to a 20.5% drop by the AdvisorShares Pure U.S. Cannabis ETF
MSOS,
+1.46%
and a gain of 21.2% by the Nasdaq during the same time period.

Curaleaf did not change its revenue outlook for the year, which Hickey said, “suggests continued growth challenges, in our view.”

Also Read: Pelorus Capital Group marks debt upgrade milestone for cannabis finance sector

Benchmark analyst Hickey also said Curaleaf’s European expansion may be a sign that management was extending itself beyond its home market in the U.S., where the growth opportunity remains “significant.”

Curaleaf’s decision to refocus its business outside of California, Colorado and Oregon “signals desperation” and that the firm “will re-evaluate our rating when a clearer picture of growth prospects and cost-saving initiatives are realized.”

Meanwhile, Wedbush analyst Gerald Pascarelli reiterated its outperform rating on Curaleaf after the company’s first-quarter results provided a “solid start” to the year amid a challenging environment.

Also Read: More Americans injured on the job are testing positive for cannabis

“Curaleaf begins 2023 positioned to deliver on its targets,” Pascarelli said. The company continues to focus on improving cash flow through better efficiencies, cost-cutting and lower capital spending, he added.

Meanwhile, Alliance Global Partners analyst Aaron Grey on Thursday reiterated a buy rating for Curaleaf.

“We are encouraged with 1Q results as CURA remains on track for a positive free cash flow year ($50 million-$60 million weighed to 4Q) and still positioning itself for long-term growth opportunities (in the U.S. and internationally),” Grey said.

Curaleaf’s first-quarter revenue of $336.5 million beat the analyst estimate of $331.9 million, according to estimates compiled by FactSet. The company reported an adjusted loss of 5 cents a share, a penny better than the loss of 6 cents a share that analysts expected.

Also Read: Cannabis banking bill ‘faces an uphill climb in this Congress,’ analysts warn before today’s Senate hearing

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