Following the company’s third quarter results, Echelon Capital Markets analyst Andrew Semple has lowered his twelve-month price target on MariMed (MariMed Stock Quote, Chart, News, Analysts, Financials OTCBB:MRMD).
On November 8, MRMD reported its Q3, 2023 results. The company posted Non-GAAP Adjusted EBITDA of negative $3.1-million on revenue of $38.8-million, a topline that was up from $33.9-million in the same period last year.
“I am pleased to report another solid quarter of strong revenue growth on both a year-over-year and a sequential basis as we continue to outperform the greater industry,” said CEO Jon Levine. “We reported our 15th consecutive quarter of positive adjusted EBITDA. Our wholesale business continued to set quarterly sales records, which will continue for the remainder of this year and next. Our balance sheet remains one of the strongest in the industry, and we were particularly pleased with the exponential growth of our Maryland operations with the commencement of adult-use sales on July 1st.”
Semple says these were mixed results.
“Revenues met our estimate (we were a bit below the consensus) as the contribution from Maryland adult-use sales and ongoing wholesale revenue growth in Massachusetts drove revenues 6.2% higher q/q. However, adj. EBITDA was below our expectations, a result of cost inflation and ongoing delays to construction activity for cultivation/processing facilities under development in Illinois, Maryland, and Missouri,” he said. “The timing of an anticipated earnings step-up now slips further into 2024, a headwind to our near-term forecasts.”
In a research update to clients November 9, Semple maintained his “Speculative Buy” rating, but cut his twelve-month price target on the stock from $1.00 to $0.75. The new target implied a return of 142 per cent at the time of publication.
The analyst thinks MRMD will post Adjusted EBITDA of $26.4-million on revenue of $148.9-million in fiscal 2023. He expects those numbers will improve to Adjusted EBITDA of $33.9-million on a topline of $169.3-million the following year.
“Our DCF valuation declined after we reduced financial forecasts,” Semple concluded. “Our 2024 EBITDA forecast declined by 27%, which is partly attributable to timing of assets turning online, which we believe is evidenced by our 2025 EBITDA forecast declining by a lesser amount of 16%. Regardless, ongoing cost inflation is having a significant impact on our longer-term forecasts. We are also taking a more cautious stance as a delayed ramp up in earning may place additional strain on MariMed’s balance sheet. We now forecast the Company to turn FCF positive in H224, and see possibility that the Company may need to find a modest amount of liquidity by then (~$2-5M), most likely to come from accruing income taxes like many other US cannabis businesses.”
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