Curaleaf's Q3 Revenue Growth Slows in Challenging Economic Environment; Shares Remain Undervalued

Curaleaf delivered weaker third-quarter results that reflected the current U.S. economic environment. Revenue grew 1% sequentially (compared with 8% in the second quarter) as support from new store openings and strength in core markets was offset by inflation hitting customers' wallets. Additional one-time drags included store closures in Florida during Hurricane Ian in late September. Offsetting some of the revenue weakness, adjusted EBITDA margin contracted only about 80 basis points sequentially to 25%. Our forecast isn’t materially changed, so we maintain our U.S. dollar-denominated $25 fair value estimate for the no-moat firm and raise our Canadian dollar fair value estimate to CAD 34 from CAD 32 on a stronger U.S. currency.