Ahead of the company’s first quarter results, Beacon analyst Russell Stanley thinks Ascend Wellness (Ascend Wellness Stock Quote, Chart, News, Analysts, Financials CSE:AAWH.U) has the potential to make real money for investors.
On May 7, before the market open, AAWH.U will report its Q1, 2024 results.
The analyst laid out what he is looking for from Ascend’s Q1.
“We are looking for revenue/adjusted EBITDA of $139M/$29M, slightly below current consensus at $140M/$30M. Current revenue forecasts range $138-$141M while adjusted EBITDA estimates range $28-$31M,” he wrote. “On its earnings call in March, management predicted Q1 results would be in line with Q4 levels, as new store contributions were expected to offset seasonality. Relative to Q4 revenue/adjusted EBITDA of $140M/$32M, our top line/consensus are in line while adj EBITDA forecasts look conservative. We are also looking for operating cash flow of $19M before working capital, and $20M including a $1M working capital release. In March, the company guided to double digit growth in both the top and bottom lines in F2024, with gross margins likely flat while operating leverage should support improved adj EBITDA margins. With the Q1 results, we will be looking for management to update that outlook.
In a research update to clients May 2, Stanley maintained his “Buy” rating and price target of $3.75 on AAWH.U, implying a return of 202% at the time of publication.
The analyst thinks the company will post Adjusted EBITDA of $127-million on revenue of $573-million in fiscal 2024. He expects those numbers will improve to Adjusted EBITDA of $143-million on a topline of $609-million in fiscal 2025.
“Ascend is now trading at 4.3x our F2025 EBITDA forecast, representing a 42% discount to the 7.4x average for our comparable group,” Stanley noted. “Potential company-specific catalysts include the Q1 results on Tuesday, progress towards refinancing the $275M credit facility maturing August 2025, and M&A activity.”
Discloure: Nick Waddell owns shares of Ascend Wellness Holdings
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