Three US cannabis stock picks from Beacon Securities

There’s been a little lift to cannabis stocks of late, but oveall, the sector remains depressed and waiting on movement at the US federal level on legalizing cannabis. Until that day arrives, investors still have plenty to mull over on the US side, with plenty of multi-state operators expanding their empires across the nation.

For those interested in the space, Beacon Securities has just reiterated “Buy” ratings on three stocks, all of which have a significant presence in the huge medical pot market in Florida.

Beacon Securities analysts Doug Cooper and Russell Stanley delivered a Sunshine State update on Monday, focusing on Curaleaf, Verano Holdings and Ayr Wellness. Cooper and Stanley said flower volume sales in Florida were up ten per cent sequentially over the second quarter, according to state industry data, while oil-based product sales volumes were up 11 per cent sequentially. The number of dispensaries in Florida was also up five per cent in the Q2. (All figures below are in US dollars except where noted otherwise.)

Stock: Curaleaf (Curaleaf Stock Quote, Charts, News, Analysts, Financials CSE:CURA)

Beacon Rating: Buy

Beacon Target Price: C$8.50

Projected 12-month return: 59 per cent

The analysts trimmed their second quarter estimates on industry heavyweight Curaleaf and have issued a Q2 forecast of $335 million in revenue and $70 million in adjusted EBITDA. 

“The stock is showing considerable technical strength, and has outperformed the MSOS ETF since early Q2, which we attribute in part to CURA’s potential TSX listing,” the analysts wrote. 

Stock: Verano Holdings (Verano Holdings Stock Quote, Charts, News, Analysts, Financials CSE:VRNO)

Beacon Rating: Buy

Beacon Target Price: C$17.00

Projected 12-month return: 293 per cent

The Florida sales data informed Cooper and Stanley’s Q2 estimates on Verano, as well, where the call is now for revenue of $230 million and adjusted EBITDA of $71 million. The analysts said Verano’s flower sales volumes in the state improved seven per cent sequentially while oil-based product sales fell by two per cent.

“Our prior forecast assumed 7 per cent quarter-on-quarter revenue growth in Florida, and while we believe VRNO has held relatively firm on pricing compared to some other operators, we now assume that Florida revenue was flat for VRNO in Q2,” they said.

Stock: Ayr Wellness (Ayr Wellness Stock Quote, Charts, News, Analysts, Financials CSE:AYR.A)

Beacon Rating: Buy

Beacon Target Price: C$12.00

Projected 12-month return: 852 per cent

Cooper and Stanley noted that Ayr Wellness recently closed a $40 million refinancing and upsizing of the mortgage on its Gainesville facility, with the proceeds already earmarked for expansion of the company’s Florida operations.

“AYR has now entered agreements to defer up to $120 million in obligations, significantly improving its balance sheet flexibility,” Cooper and Stanley wrote.