Curaleaf Earnings: Illicit Market Still Hindering Top Line Growth, but Profit Focus Protects Margins

No-moat Curaleaf announced first-quarter results with few surprises. Revenue declined about 2.5% sequentially, in line with the pressure from the stubborn illicit market. On the positive side, management’s shifted focus to profitability led adjusted EBITDA margins to expand to 22% from 20% in the fourth quarter. Looking to the rest of the year, Curaleaf maintained its guidance for full-year revenue growth of low- to mid-single digits and adjusted EBITDA margins in the mid-20% range. In comparison, we forecast top line growth of 5% and margin of 23%. We’ve maintained our fair value estimates of $20 and CAD 27 per share.