Ayr Wellness downgraded at Ventum

Following the company’s fourth quarter results, Ventum Capital Markets analyst Andrew Semple has downgraded and cut his price target on Ayr Wellness (Ayr Wellness Stock Quote, Chart, News, Analysts, Financials CSE:AYR.A).

On March 6, AYR reported its Q4 and fiscal 2024 results. In the fourth quarter, the company posted Adjusted EBITDA of $26.1-million on revenue of $114.3-million.

“Over the past quarter, we have made crucial steps towards reorienting the business to reflect our forward-looking vision of Ayr,” said interim CEO Steven M. Cohen. “And while our fourth quarter and full-year results reflected ongoing macroeconomic pressures and company-specific challenges that impacted revenue and profitability, we remain confident that sustained growth and enhanced profitability are achievable within our footprint through disciplined cost reductions, streamlined operations and improved execution.”

Semple says the company’s fortunes are sliding.

“With disappointing Q4/24 earnings and an ongoing search for a full-time CEO/CFO, the Company is on weaker footing as it enters a period where it needs to begin considering debt refinancing solutions,” he wrote. “Ayr needs positive catalysts to materialize this year to improve its position in debt refinancing talks. Key potential catalysts include federal rescheduling (which could save Ayr up to $50M/year in taxes), Pennsylvania adult-use legalization, and its new Ocala, FL cultivation facility coming online in Q3/25.”

In a research update to clients March 7, the analyst downgraded AYR from “Buy” to “Neutral” and cut his price target from $2.75 to $0.40, implying a return of 27% at the time of publication.

Semple thinks AYR will post Adjusted EBITDA of $85.0-millionon revenue of $449.7-million in fiscal 2025. He expects those numbers will improve to Adjusted EBITDA of $99.2-million on a topline of $471.6-million in fiscal 2026.

“There remain viable pathways for existing shareholders to potentially see meaningful returns, though loss of capital remains a risk, he added. “Due to the wide variance of potential outcomes, we move to a NEUTRAL rating as we await developments to unfold. We previously noted the extreme sensitivity and high degree of financial leverage to our earnings forecasts, and stated that Ayr is “among the most SPECULATIVE” in our coverage. Unfortunately with a continued slide in earnings expectations, Ayr’s torque is proving to be to the downside.”