Ascend Wellness has an upside of 817%, this analyst says

Its fourth quarter results are in the books and Ventum Capital Markets analysts Andrew Semple has raised his price target on Ascend Wellness (Ascend Wellness Stock Quote, Chart, News, Analysts, Financials CSE:AAWH.U)

On March 13, AAWH reported its Q4 and fiscal 2024 results. In the fourth quarter, the company posted Adjusted EBITDA of $30.2-million on total net revenue of $136.0-million, a topline that was down 4.0% year-over-year.

“The fourth quarter marked the first full quarter with our new management team in place, and I am pleased with the initial progress we made on our key initiatives – improving profitability, maximizing asset efficiency, and driving cash flow generation,” CEO Sam Brill said. “This was achieved through our team’s success in substantially completing our $30 million in annualized cost savings target, ahead of plan, and with this milestone completed we have turned our efforts to driving revenue growth. Looking ahead, we are focused on executing our densification strategy, backed by our strengthened balance sheet, that puts us in a strong position to act on exciting retail and wholesale opportunities across our footprint.”

Semple says this quarter bested his expectations.

“Ascend Wellness Holdings Inc. reported Q4/24 results that beat our EBITDA forecast by 24%,” he wrote. “Cost cuts and margin improvement were evident in the first full quarter with the new management team at the helm. While sales declined (and were below expectations), operational improvements bode well for stabilization and a return to sequential growth by Q2/25. We remain pleased by the new management team’s plan to improve operating performance and profitability, with $30M of annualized cost cuts implemented, while Ascend continues to aim for growth.

In a research update to clients March 13, Semple maintained his “Buy” rating and raised his price target on AAWH from $2.50 to $2.75, implying a return of 816.7% at the time of publication.

The analyst thinks the company will post Adjusted EBITDA of $112.4-million on revenue of $535.2-million in fiscal 2025. He expects those numbers will improve to Adjusted EBITDA of $121.3-million on a topline of $545.2-million in fiscal 2026.

“We believe Ascend is an attractive investment opportunity in US cannabis, with the Company possessing a healthy balance between quality (e.g., relatively under-levered balance sheet, strong operating performance, high-quality limited-license markets) and torque to upside from state and federal catalysts,” Semple argued. “We note that our risk categorization moves to SPECULATIVE (prev. ABOVE AVERAGE). The Company’s share price has moved into penny stock territory, and the implied upside to our price target at 816.7% is commensurate with a speculative asset class.”

Disclosure: Nick Waddell owns shares of Ascend Wellness Holdings