VRNO stock keeps “Buy” rating at Echelon

Following the company’s fourth quarter results, Echelon Capital Markets analyst Andrew Semple remains upbeat about Verano Holdings (Verano Holdings Stock Quote, Chart, News, Analysts, Financials NEO:VRNO)

On February 29, VRNO reported its Q4 and fiscal 2023 results. In the fourth quarter the company posted Adjusted EBITDA of $73.4-million on revenue of $237.2-million, a topline that was down one per cent over the same period last year.

“I’m incredibly proud of our performance in 2023, highlighted by key wins across all aspects of the business,” CEO George Archos said. “As excitement and anticipation builds in the industry, 2024 has the potential to be a game-changing year, and Verano is well positioned to continue capitalizing on growth opportunities both in the current regulatory environment and from any state or federal reform. While we’ve never been dependent on legislation to drive sustained growth, with adult use imminent in Ohio, on the horizon in Florida and Pennsylvania, and the growing anticipation of a federal rescheduling decision, there is limitless potential for Verano. I’m thankful for all that our team accomplished in 2023, and believe the sky is the limit for what we can achieve in 2024 and beyond.”

The analyst said the quarter was a positive development.

“Verano Holdings reported solid Q423 results,” he wrote. “The Company exceeded revenue forecasts generating $237.2M in the quarter, with both retail and wholesale segment revenues outperforming our expectations. This was also well above management’s prior guidance, which suggested a sales range of between $218-233M. However, margins retreated a more than expected as the Company continued to pursue inventory liquidation which may have pressured gross margins by ~600bps. We believe Verano can backfill margin levels in future quarters as inventory liquidation returns to more normalized levels, though revenues are also likely to dip as it slows the pace of liquidation activity. On the balance, adj. EBITDA was in line with our estimate and the consensus, and we view the Q423 results as solid.”

In a research update to clients February 29, Semple maintained his “Buy” rating and price target of $11.00 on VRNO, implying a return of 64.2 per cent at the time of publication.

The analyst thinks VRNO will post Adjusted EBITDA of $288.9-million on revenue of $904.3-million in fiscal 2024. He expects those numbers will improve to Adjusted EBITDA of $318.4-million on a topline of $968.8-million the following year.