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.
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