Is Schwazze still a buy?

Ahead of the company’s third quarter results, Beacon Securities analyst Russell Stanley has maintained his “Buy” rating on Schwazze (Schwazze Stock Quote, Chart, News, Analysts, Financials NEO:SHWZ).

In mid-November SHWZ will report its Q3, 2024 results. The analyst ran down what he expects.

“We have trimmed our Q3/24 revenue/adj EBITDA forecast from $44M/$10.2M to $41M/$9.2M based on recent state sales data from New Mexico and Colorado. Our forecast was already street low for both estimates, though we are just one of three brokers formally covering this name. Including our revisions, we estimate current consensus at $44M/$11.2M. Though details are currently TBA, we expect SHWZ to report its Q3 results around mid-November.”

In a research update to clients October 7, Stanley maintained his “Buy” rating and price target of $2.00 on SHWZ, implying a return of 590% at the time of publication.

The analyst thinks SHWZ will post Adjusted EBITDA of $36.0-million on revenue of $169.0-million in fiscal 2024. He expects those numbers will improve to Adjusted EBITDA of $58.0-million on a topline of $186.0-million in fiscal 2025.

Stanley says the upcoming earnings will be a focal point.

“With the November release, we will also be looking for an update on the company’s efforts to bring its filings up to date,: he wrote. “Last April, SHWZ replaced BF Borgers with Baker Tilly as its auditor, which we continue to review as an upgrade. The SEC subsequently issued an order citing Borgers’ “deliberate and systemic failures” to comply with auditing and review standards for many of its clients. As a result of that order, Baker Tilly must re-audit the F2023 financial statements previously audited by BF Borgers. The company’s 10-Qs for Q1 and Q2 have also been delayed, with the Q1 delay resulting in the company’s OTC listing moving to the Expert Market, which has negatively impacted the stock. With its Q2 results in August, management reported that Baker Tilly’s re-audit was/is still in progress, though it had not revealed any material misstatements to date. Once the re-audit is complete, SHWZ can submit an application to restore its OTC QX listing, which will likely take ~ one month from the date of the application.”