Glass House Brands is a buy, Ventum says

Its fourth quarter results are in the books and Ventum Capital Markets analyst Andrew Semple thinks there is still good money to be made on Glass House Brands (Glass House Brands Stock Quote, Chart, News, Analysts, Financials NEO:GLAS).

On March 25, Glass House reported its Q4 and fiscal 2024 results. In the fourth quarter, the company posted its Q4 and fiscal 2024 results. In the fourth quarter, the company posted Adjusted EBITDA of $9.0-million on revenue of $53.0-million, a topline that was up 31%, year-over-year.

“2024 was another year of meaningful development for Glass House Brands positioning the Company for its next wave of expansion in the years ahead,” CEO Kyle Kazan said. “We commenced commercial operation of Greenhouse 5 in January, completing Phase II expansion at our SoCal Farm. Greenhouse 5 had its first full quarter of production and sales in Q2 and since that time, production volumes, quality and yields from this facility have all substantially exceeded our original expectations. In the fourth quarter, we began Phase III expansion, including the retrofit of Greenhouse 2 along with investments in related support facilities. We expect initial revenues from this facility by year-end, with production estimated at 275,000 pounds in its first full year of operation while generating consistently high-quality cannabis flower bringing total annual capacity to more than 1 million pounds of biomass.”

Semple said this was a strong result.

“Glass House showed strength across the organization, with sales from each segment exceeding our forecasts,” he wrote. “The wholesale biomass segment saw the steepest growth with biomass production up by 60% YoY. This was driven by contributions from Greenhouse 5 which came online earlier in the year. Pricing was a headwind, though it was not as bad as earlier feared. Retail and branded wholesale CPG sales also outperformed our estimates, as the Company’s revitalized strategy and rapid consumer uptake of its Allswell brand were bearing fruit.”

In a research update to clients March 26, Semple maintained his “Buy” rating and price target of (US) $12.00 on GLAS, implying a return of 152.1% at the time of publication.

The analyst thinks the company will post Adjusted EBITDA of $37.1-million on revenue of $220.6-million in fiscal 2025. He expects those numbers will improve to Adjusted EBITDA of $62.9-million on a topline of $289.5-million in fiscal 2026.

“We reiterate our BUY rating and maintain our price target of $12.00/shr, based on an adj. DCF value of $12.15/shr (prev. $11.72/shr),” Semple added. “Our adj. DCF is based on a baseline DCF value of $9.69/shr (prev. $9.03/shr), plus a probability-weighted (50%) value for Greenhouses 3 & 4 expansion of $2.46/shr (prev. $2.69/shr). Our DCF valuation utilizes a 13% discount rate and a 22.5x FCF multiple on the terminal year of our forecast horizon (2028E). We note our valuation is highly sensitive to the terminal year price assumption, which now stands at $270/lb (prev. $295/lb).”