Ahead of fourth quarter earnings from US cannabis company Verano Holdings (Verano Holdings Stock Quote, Charts, News, Analysts, Financials CSE:VRNO), Beacon Securities analyst Russell Stanley delivered an update to clients on Monday, saying Verano’s Q4 revenue should be flat compared to its third quarter results, with earnings ending up lower sequentially.
Headquartered in Chicago, Verano has interests in 14 states and core markets in Illinois, Florida, New Jersey, Pennsylvania, Arizona, Maryland, Ohio, Nevada and Connecticut. The company is expected to report its quarterly financials before market open on Thursday.
Stanley said he’ll especially be looking for management’s colour on Verano’s business in Florida, Illinois and New Jersey. On Florida, where Verano has opened five dispensaries since releasing its third quarter earnings, the company now ranks second overall with 66 stores. Stanley said the state’s adult-use legalization campaign is making strong progress towards securing a spot for a legalization question on the November 2024 ballot.
In Illinois, Stanley said he’ll be interested to hear of Verano’s latest expectations for growth in the wholesale market, where last year the state issued 192 new retail licenses and the first of those only opened in late 2022.
“As a major wholesaler in IL, VRNO should see a net benefit from these new stores despite the increased retail competition. During the November earnings call, management predicted that ~60 new stores should open during F2023,” Stanley wrote.
“Finally, in New Jersey, where the company already operates the state maximum three adult-use stores, we will be looking for an update on retail performance as well as the outlook for wholesale growth,” he said.
On the fourth quarter, Stanley said he has estimated $225 million in revenue and $74 million in adjusted EBITDA, with the consensus forecast at $227 million and $76 million, respectively. (All figures in US dollars except where noted otherwise.)
Further out, Stanley is calling for 2023 revenue to hit $1.134 billion compared to $878 million in 2022 and for adjusted EBITDA to go from $319 million in 2022 to $395 million in 2023.
Stanley said at 4.0x his 2023 EV/adjusted EBITDA forecast, Verano is currently trading at a 37 per cent discount to the 6.4 average among CSE-listed US cannabis operators. The analyst reiterated a “Buy” rating on the stock and C$26 target price, which at press time represented a projected one-year return of 550 per cent.
For upcoming catalysts, Stanley pointed to the Q4 results on Thursday, additional buildout updates and the Q1 2023 results in May.
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