Things Look Grim For Curaleaf Holdings, Inc. (CSE:CURA) After Today's Downgrade
Market forces rained on the parade of Curaleaf Holdings, Inc. (CSE:CURA) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business. At US$5.90, shares are up 5.7% in the past 7 days. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.
Following the downgrade, the most recent consensus for Curaleaf Holdings from its eleven analysts is for revenues of US$659m in 2020 which, if met, would be a sizeable 198% increase on its sales over the past 12 months. The losses are expected to disappear over the next year or so, with forecasts for a profit of US$0.0051 per share this year. Prior to this update, the analysts had been forecasting revenues of US$801m and earnings per share (EPS) of US$0.022 in 2020. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a pretty serious decline to earnings per share numbers as well.
See our latest analysis for Curaleaf Holdings
The consensus price target fell 8.3% to CA$14.15, with the weaker earnings outlook clearly leading analyst valuation estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Curaleaf Holdings, with the most bullish analyst valuing it at CA$22.00 and the most bearish at CA$6.50 per share. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. 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.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's clear from the latest estimates that Curaleaf Holdings' rate of growth is expected to accelerate meaningfully, with the forecast 198% revenue growth noticeably faster than its historical growth of 87% p.a. over the past three years. Compare this with other companies in the same industry, which are forecast to grow their revenue 37% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that Curaleaf Holdings is expected to grow much faster than its industry.
The Bottom Line
The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Curaleaf Holdings. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Curaleaf Holdings analysts - going out to 2024, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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