Several market commentators recently noted that consensus analyst revenue estimates for large MSOs have declined by a low single-digit percentage since November.
We decided the longer-term view was appropriate and that EBITDA was more important than revenue. We looked at the nine largest market cap MSOs and examined analysts’ projected 2022 EBITDA and EBITDA margins from a year ago, compared to their forecast 2022 results today.
The graph shows the percentage modification in EBITDA (green bar) and EBITDA margin (orange dot). The blue line shows the performance of each company’s stock relative to the performance of the MSOS ETF (blue line).
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Analysts have sharply cut their EBITDA estimates for Curaleaf (CSE: CURA) and TerrAscend (CSE: TER) and moderate for AYR (CSE: AYR), Cresco (CSE: CL), and Jushi (CSE: JUSHF). is lacking. Estimates for Columbia Care (CSE:CCHW) and GTI (CSE:GTII) are virtually unchanged, and Verano and Trulieve estimates are higher.
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Some of these modifications had a significant impact on M&A activity. TruLive and Verano completed $1.5B and $630M respectively in acquisitions during the period. But even some major acquirers had sharply revised their EBITDA. For example, AYR completed $1.0B in acquisitions, and analysts have revised their 2022 EBITDA estimates down 8%.
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The missing link is margin (shown by Orange.com. All companies on the list, except Curaleaf and TerrAscend, have higher 2022 revenue projections than a year ago. Still, every company except Verano (data not available) is lower) Compared to a year ago, EBITDA margins are projected for 2022. These lower margins are higher than the higher projected revenues.
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What happened to margin expectations? We estimate that the sell-off equity analysts were a bit too optimistic and were forced to rein in their expectations.
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Interestingly, the blue line shows that the revision in earnings had little effect on relative performance. The Curaleaf, with the most significant downward revisions, actually outperformed the Trulieve with the most significant upward revisions.
The Viridian Capital Chart of the Week highlights key investment, valuation, and M&A trends taken from the Viridian Cannabis Deal Tracker.
Launched in January 2015, and having analyzed over $60B in deals, Viridian Cannabis Deal Tracker is a proprietary data service that monitors and analyzes capital raising and M&A activity in the legal cannabis and CBD industries. Deal Tracker provides proprietary data and market intelligence on weekly transactions, including:
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Deals by Industry Sector (to track capital flows and M&A deals by one of 12 sectors – from farming to brand to software)
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Deal Structure (Equity/Debt for Capital Growth, Cash/Stock/Earnout for M&A)
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Principal for the transaction (issuer/investor/lender/acquirer)
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Key Deal Terms (Deal Size, Valuation, Pricing, Warrants, Cost of Capital)
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Transactions by location of issuer/buyer/seller (to track capital inflows and M&A deals by state and country)
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Credit Rating (Leverage and Liquidity Ratio)
Photo by Xavier Hasse.
The previous article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.
