AYR stock wins target raise at Beacon

Its fourth quarter results are in the books and Beacon analyst Russell Stanley is even more bullish on AYR Wellness (Ayr Wellness Stock Quote, Chart, News, Analysts, Financials CSE:AYR.A).

On March 13, AYR reported its Q4 and fiscal 2023 results. In the fourth quarter, the company posted Adjusted EBITDA of $24.2-million on revenue of 114.3-million.

“Two thousand twenty-three was a transformational year for Ayr as we executed on our financial and operational goals — growing revenue, enhancing profitability and strengthening our balance sheet,” CEO David Goubert said. “We grew revenue 10 per cent, grew adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] by 51 per cent, expanded adjusted EBITDA margins to 25 per cent and generated positive cash flow from operations for 2023. Additionally, in February, 2024, we completed the deferral or retirement of nearly $400-million of debt maturities and now have a clear financial runway to focus on our optimization efforts as we look to capitalize on multiple industry catalysts ahead.”

Stanley summed up the quarterly results.

“AYR reported Q4 revenue/EBITDA of $115M/$30M v. our forecast of $114M/$27M and consensus at $116M/$28M,” he wrote. “While the cultivation setback in Florida (see our Q3 note) had a $5M negative revenue impact (v. guidance of $4-$6M), sales in all other markets held firm or improved q/q to offset that. Wholesale revenue improved 41% q/q, taking its share of sales to 15% from 11%. Adjusted gross margins were 104 bps ahead of forecast, and up 110 bps q/q. We understand improved wholesale revenue mix (more finished goods v. bulk flower/trim) drove that margin expansion, partially offset by the $5M revenue impact in Florida (AYR’s highest margin state). Better (lower) than expected OPEX margins also contributed, producing adjusted EBITDA margins that were 197 bps stronger than our forecast/consensus at 24%.”

In a research update to clients March 13, Stanley maintained his “Buy” rating but raised his price target on AYR from $7.25 to $8.00, implying a return of 229 per cent at the time of publication.

The analyst expects AYR will post Adjusted EBITDA of $129.0-million on revenue of $510.0-million in fiscal 2024. He expects those numbers will improve to Adjusted EBITDA of $154.0-million on a topline of $569.0-million the following year.

“AYR trades at just 4.9x our F2025 adjusted EBITDA forecast. This represents a 23% discount to the 6.3x average amongst US operators. Potential company specific catalysts include progress on the tax refunds, buildout updates, the Q1 results in May and M&A activity.”