Ascend Wellness a Top Pick at Ventum

Want to make the second half of your year better? Pick up some shares of Ascend Wellness Holdings (Ascend Wellness Holdings Stock Quote, Chart, News, Analysts, Financials CSE:AAWH).

That’s the opinion of Ventum Capital Markets analyst Andrew Semple, who is a research update to clients July 16 maintained his “Buy” rating and price target of (US) $3.50 on AAWH.

The analyst calls Ascend “the best risk/reward play in U.S. cannabis right now and ranks the stock as a “Top Pick”

“Ascend Wellness is a high-quality cannabis operator that offers significant torque to upside from federal and state regulatory catalysts in the US,” the analyst wrote. “We believe Ascend presents the best risk/reward trade-off in US cannabis, providing investors with a mix of good state exposure, well-run operations, and a highly attractive valuation. The Company has witnessed meaningful market share gains with its brand portfolio currently holding the #3 market share position in Illinois, Massachusetts, and New Jersey. Ascend’s Simply Herb brand is currently the best-selling brand in Massachusetts after steep market share gains in 2023. Its strong performance is driven by its unique retail strategy that blends flagship stores in high-quality real estate, plus outlet storefronts that aim to be price competitive. This combines well with its strong wholesale vertical that offers high-quality products and has established good relationships with third-party retailers. Ascend’s financial position remains relatively healthy, with US$72.9M of cash on hand (~43% of current market cap) as of Q1/24.”

Semple thinks AAWH will post Adjusted EBITDA of $128.9-million on revenue of $582.1-million in fiscal 2024. He expects those numbers will improve to Adjusted EBITDA of$140.6-million on revenue of $593.5-million in fiscal 2025.

“Ascend’s shares currently trade at 3.3x 2024E EV/EBITDA (based on consensus estimates), representing a 51.6% discount to its peer group of large US MSOs. Ascend currently has the lowest 2024E EV/EBITDA multiple within our tracking group of North American cannabis companies. We reiterate our BUY rating and price target of US$3.50/shr, based on a DCF valuation with a 15% discount rate and terminal FCF multiple of 22.5x,” the analyst concluded.

Disclosure: Nick Waddell owns shares of Ascend Wellness.