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Cannabis Watch: Curaleaf narrows quarterly loss and tops $1 billion in annual revenue for the first time

Curaleaf Holdings Inc. reported a narrower fourth-quarter loss that was wider than Wall Street estimates, but the cannabis company topped $1 billion in annual revenue for the first time.

Curaleaf
CURLF,
+0.99%

CURA,
+2.63%

late Thursday said it lost $27.54 million, or 4 cents a share, in the latest quarter, after a restated loss of $37.07 million, or 6 cents a share in the year-ago quarter.

Revenue totaled $320.0 million, up 39% from $230.3 million in the year-ago quarter, and 1% above the third quarter’s total of $317.1 million.

Analysts expected a loss of 2 cents a share and revenue of $323.4 million, according to a FactSet survey.

The U.S.-listed shares of Curaleaf closed at $6.11 on Thursday, up about 1%. That snapped a record-long nine-session losing streak, in which the shares shed 32% to close Wednesday at a 20-month low.

The stock has fallen 33.8% over the past three months, compared with a loss of 25.2% by the AdvisorShares Pure U.S. Cannabis ETF
MSOS,
-3.03%

and the S&P 500 index’s
SPX,
-0.53%

3.9% decline.

Curaleaf CEO Joe Bayern told MarketWatch the company’s 2021 revenue of $1.21 billion marked a record, and was within the company’s target of $1.2 billion to $1.3 billion. In 2020, Curaleaf generated revenue of $626.6 million.

“We continued to make progress on building up key metrics, with improved margins and revenue and we expanded our footprint.” Bayern said. “We thought it was a pretty spectacular year.”

In the fourth quarter, Curaleaf narrowed its net loss with a roughly $20 million increase in operating income and $2 million of lower income tax expense, partially offset by an increase of $15 million in other expenses.

For 2022, Curaleaf is expecting revenue of $1.4 billion to $1.5 billion, compared with the FactSet consensus of $1.57 billion as of Feb. 28.

Analyst Aaron Grey of Alliance Global Partners reiterated a buy rating and lowered his price target on the Canada-listed stock to C$15 from C$21. The lowered target still implies 92% upside from Thursday’s closing price of C$7.80.

“Despite the 2022 sales guide coming in below the Street, we believe CURA’s midpoint is achievable and beatable absent a notable change with the consumer wallet or state regulators, with the company set up well over the coming years with new states coming online (N.J., N.Y., CT),” he wrote in a note to clients on Friday.

In 2022, Curaleaf expects to continue growing its gross margins in cannabis sales as well as its operating margin. In the fourth quarter, the company grew gross margins on cannabis sales to 49.7% from 47.8% in the year-ago quarter.

Curaleaf plans to consider acquisitions in 2022 including in key markets like Bloom Dispensaries in Arizona; also deals to build out its cultivation and other capabilities such as its $67 million purchase of Las Sueños in Colorado; or possibly additional acquisitions in newer markets such as Europe, Bayern said.

CEO Bayern said the surge in the omicron variant of the coronavirus that causes COVID-19 impacted the company and the overall industry in late 2021 and early 2022, but he’s optimistic for the balance of the year. The company is planning to grow in the Northeast and other regions.

“We saw a little slowdown in the back half of 2021 and early 2022,” he said. “We think it’s temporary, and I think 2022 is going to be a good year for Curaleaf and the rest of the industry.”

During the fourth quarter, Curaleaf increased its retail dispensary footprint by eight locations and agreed to buy Tryke Companies, a multi-state operator in Nevada, Arizona and Utah.

It also closed a $475 million debt offering of in 8% senior secured notes due 2026 and retired its older debt.

As of Dec. 31, the company counted 117 dispensaries and expanded its cultivation and production capacity to 4.4 million square feet, up by 2.5 million square feet from the year-ago level. It also entered the European market with the acquisition of EMMAC Life Sciences Group.

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