Verano wins price target raise at Beacon

Following its most recent acquisition, Beacon Securities analyst Russell Stanley has raised his price target on Verano Holdings (Verano Holdings Stock Quote, Chart, News, Analysts, Financials NEO:VRNO).

On August 22, VRNO announced that it had completed the previously announced acquisition of operations in Virginia and
Arizona from The Cannabist Company.

“Our entrance into Virginia provides near-term growth potential within the existing medical program and adds yet another valuable market to our footprint with a high probability of adult use in the near future,” said CEO George Archos. “Leveraging our extensive M&A history and experience, we are actively integrating these facilities into our network and will build on our legacy as a top-tier medical operator in preparation for potential adult use in Virginia. Additionally, expanding our Arizona operations allows us to further scale our retail footprint and broaden access to our award-winning brand portfolio with increased cultivation capacity and high-performing dispensaries in attractive locations in Prescott and Tempe. We are thankful for the Cannabist team’s partnership and thrilled to welcome new colleagues in Virginia and Arizona as we turn the page on an exciting new chapter for Verano.”

Stanley summarized the development.

“VRNO has acquired the licensing, a cultivation/manufacturing operation, and the state maximum of 6 dispensaries in Health Service Area (HSA) V for $105M ($20M in cash, $40M in stock, and a $30M amortizing note paying 7%, maturing in two years),” he wrote. “During its Q2 earnings call earlier this month, VRNO noted plans to expand, upgrade and automate the cultivation facility, as well as relocate the dispensary currently co-located with the grow. VA is unique for dividing the state into five regions, giving each licensee exclusivity in that region (HSA I is currently vacant pending a license award, which should be imminent). HSA V is home to 2M people. CBST retains its licensing/operations for HSA IV. Virginia’s medical market is still relatively young and could 3-4x from here. Adult-use possession has been legal for 3+ years, but earlier this year, Governor Youngkin (Republican) vetoed legislation that would have established a commercial adult-use market. Governors are limited to one term in VA, and the next election will be in November 2025, so we expect a new governor and renewed adult-use potential in 2026.”

In a research update to clients August 22, Stanley maintained his “Buy” rating and raised his price target on VRNO from $12.75 to $13.50, implying a return of 152% at the time of publication.

The analyst thinks VRNO will post Adjusted EBITDA of $283.0-million on revenue of $929.0-million in fiscal 2024. He expects those numbers will improve to Adjusted EBITDA of $341.0-million on a topline of $1.05-billion in fiscal 2025.